Brutally put, RMD’s is the IRS’s way of saying you cannot keep retirement funds in your non-taxable accounts until death.
You must start taking the money back out, and be taxed on it, a certain number of years before you die. The rules have been around for quite some time, but some new rules have kicked off in 2020. Some of the changes are:
- The RMD rules apply when you reach age 72 instead of 70 1/2.
- Contributions are now allowed to IRA’s after you turn 70 1/2.
- Inherited retirement accounts must be zero at the end of 10 years instead of over the beneficiaries lifetime.
FOLLOWING is an EXAMPLE of the Table used by many RMDers to determine the number of years they have to take out their retirement plan money. It is based on their age in any given year. So for example, if you
- Turn 75 years old in 2020.
- Have $68,700 in applicable qualified retirement plans as of 12/31/2019.
- Then you, at a minimum, have to take out $3,000 ($68,700/22.9) in 2020.
This is general information and should not be relied upon to evaluate or prepare you tax return or calculate your required minimum distributions. Instead, please use the above information as a resource to help you discuss your tax picture with your tax preparer and financial advisor.
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