Required Minimum Distribution Rules

 

Some confusion has arisen regarding those recently turning 70 ˝, the age at which Required Minimum Distributions (RMDs) must start.  The Worker, Retiree, and Employer Recovery Act of 2008 waives any RMDs for 2009 from retirement plans, such as 401(k) plans, 403(b) plans and Individual Retirement Arrangements (IRAs).  The following discussion should provide clarification.

 

Turned 70 ˝ in 2008

 

The Act does not waive any 2008 RMDs.  If you turned 70 ˝ in 2008, you were required to take your first RMD (2008 RMD) as late as April 1, 2009.  Even though you may have chosen to delay this RMD until 2009, it is not subject to the waiver, since it is your 2008 RMD.  You were required to take this distribution by April 1, 2009.  No 2009 RMD (your second RMD) is required due to the 2009 waiver.  You are required to take your third RMD (2010 RMD) by December 31, 2010.

 

Turned 70 ˝ in 2009

 

If you turned 70 ˝ in 2009, you would have been required, in the absence of the 2009 RMD waiver, to take your first RMD for 2009.  You could have delayed this RMD as late as April 1, 2010.  However, 2009 RMDs were waived, so no 2009 RMD is required.  You must take your 2010 RMD by December 31, 2010.  Remember your 2010 RMD is technically considered your second RMD, since the waived 2009 RMD would have been your first.

 

Turning 70 ˝ in 2010

 

If you are turning 70 ˝ in 2010, you are required to take your first RMD (2010 RMD), which you can delay as late at April 1, 2011.  Your second RMD must be taken by December 31, 2011, and every year thereafter.

 

As always, feel free to contact us for assistance with this or other financial planning and investment needs.