Required Minimum Distributions (RMDs) Flashcards
If Asked about Death Prior to 2020 for RMD purposes what rules apply?
Old Rules
What is the Required Begging Date that an individual must take withdrawals from qualified plans for RMD purposes?
73
RMD requirements in the Trigger year may be delayed until what?
April 1st (remember that is not April 15th), following the year, but must take another distribution that year by December 31st
What are the exceptions to the Required Beginning Date?
Is still employed (Not allowed if a 5% or greater owner of the plan sponsor)
This only applies to the employers plans DOES NOT count to participants other plans
What is the Penalty for failure to comply with RMDs
25% exercise tax reduced to 10% if withdrawn promptly
How do you calculate the RMD?
Calculated by dividing the balance of the account as of December 31st of the preceding year by the factor in the IRS tables using the taxpayers age at the end of the year
What is the exception to calculating RMDs for married retirement account holders?
If the owners spouse is more than 10 years younger, will use the joint life expectancy table which will produce a lower RMD
What are the categories of persons that inherit a retirement account?
Beneficiary - Least favorable, usually estates and charities
Designated Beneficiary - living person, See Through Trust, Usually the Children
Eligible Designated Beneficiary - Surviving spouse and Not 10 years younger and has a disability, chronically ill, or minor child
What are the rules for a IRA Beneficiary?
Usually estates and Charities
If account owner died before reaching their RMDs must be fully distributed 5 years after death
If account owner was taking RMDs at time of death then they can continue taking RMDs using the remains life expectancy tables and reducing the advisor by 1 each year
What are the Rules for a Designated Beneficiary?
Living Person or See-through Trust (Living persons life can be used to calculate RMDs)
Retirement account can only be stretched to Dec 31st of the year containing the 10th anniversary of death
Individual died before RMDs not required to take RMDs
If Individual died and was taking RMDs must calculate and receive RMDs each year, must empty the account by year 10.
What are the Rules for Eligible Designated Beneficiaries?
have two Categories: Surviving Spouse and people who are not surviving spouse
Surviving Spouse: Has the option to roll the account into her own retirement account or Distributions over the spouses remaining life expectancy (using the spouses current age each year, beginning in the year FOLLOWING death or the remaining life expectancy of the decedent in the year of death, reduced by one each year
Non Surviving Spouse: Person with Disability, Chronically ill or minor child. Rules above apply except they cannot roll over into their own retirement account. Once minor child reaches the age of 21 the 10 year rule locks in.
What distributions from a “Qualified Plans” and 403b plans are allowed that do not result in a 10% EWP?
72t pmts
Medical expenses exceeding 7.5% of AGI
Separation from service after age 55
$5,000 per parent after birth or adoption of a child under 18
QDRO
Terminal illness up to 18mos
Federally declared disaster up to $22,000 a year
An IRA has all of the same early distributions penalty exceptions from a Qualified plan except what?
IRAs do not allow the after 55 separation of service
Does not use a QDRO
But does allow
Higher education cost for taxpayer, child, or grandchild
Up to $10,000 for a first time home buyer
Health insurance premiums for unemployed persons (must be drawing unemployment)
When using a the rule of 72t what are the two methods that can be used to calculate how much the equal payments are?
Amortization method
Annuity Method
