We get asked a lot of questions about IRAs, and their required minimum distributions or RMDs. So Mindy Norton with our JMF Pension Consulting group provided the following synopsis to help explain.
As an individual, you are required to begin taking minimum distributions from your traditional IRA in the year in which you turn age 70½. You may elect to delay that first distribution until April 1st of the following year, but you must take your second distribution by December 31st of that same year, and then at least annually after that. The same rule applies to your account in a qualified retirement plan; however, there is an exception if you are not an owner of the company that sponsors the qualified retirement plan, and you continue to work past age 70½. In that case, you may delay taking your first minimum distribution until the year in which you actually retire.
The calculation for the minimum amount to be distributed from your traditional IRA to you is based on the balance in your IRA account at the beginning of the year. If you transfer your IRA from one custodian to another during the year, the IRA calculation often gets overlooked by the new custodian, because there is no beginning-of-the-year balance for the new account.
If you have multiple IRA accounts, you may take a minimum distribution from each account; or you may add the balances of the accounts together, calculate your required minimum distribution for the combined total, and take a single distribution from one of the IRA accounts.
As a reminder, Roth IRAs have no mandatory withdrawal requirements until after the death of the IRA owner.
Consulting with your JMF tax advisor about your required minimum distributions can help you make the best choices for you and avoid a costly penalty tax.