A reminder that Required Minimum Distributions (RMDs) are payable for anyone over the age of 70-1/2. These rules can be complicated. For money held in an IRA, 401(k) or Profit Sharing Plan, the amount of the distribution is based on your balance as of December 31st of the previous year. For benefits in a pension or cash balance plan, the plan’s actuary can calculate the amount due. If you are actively employed, you may defer receipt of the RMD from your employer’s plan in certain situations. Please contact the plan administrator for your options.
RMDs have been in the news recently but nothing has changed for 2020. Here is a summary of recent activity:
- The IRS proposed updated simplified tables based on longer expected lifetimes. The impact on required distributions is approximately a 7% decrease. For example, someone aged 77 with an IRA balance of just over $100,000 and an RMD of $5,000 under the current tables, would see that RMD drop by $350. These tables, if adopted, will not go into effect until 2021.
- Congress is midway through approving retirement legislation titled “Setting Every Community Up for Retirement Enhancement Act of 2019” or SECURE Act of 2019. If passed by the Senate, the minimum age to start receiving distributions will be increased to 72. However, this will not impact anyone turning 70-1/2 in 2019.
If you are new to receiving RMDs, please refer to the IRS website for more information about timing and taxes or confer with your tax advisor.