Understanding IRA's, RMD's, and various rules

Hi, Ryan. I have heard that there are some circumstances when a RMD is not required to be taken from a retirement account. Is this correct, and if so what circumstances are those? Thank you.” – Allen

Hello, Allen. That’s a great question – and a timely one, too! We’ve been discussing required minimum distributions (RMDs) a lot around here lately on our podcast and in my blog. But with the 2016 deadline for RMDs hanging overhead, I don’t think we can say enough about them this time of year. So, thanks for the question, Allen. Let’s get to it…

As I recently said, RMDs are required for people who are 70.5 years of age or older and own pre-tax retirement accounts – for example, 401(k)s and Traditional IRAs. And the deadline for taking RMDs is December 31.

However, Allen, you’re correct. There a few exceptions to this rule.

• Depending on when you reached the age of 70.5 years, it’s possible to delay your first RMD. For example, if you became 70.5 years of age in 2016, you can delay taking your first RMD until April 1, 2017.
• Some plans will dismiss the RMD requirement if you’re still employed. But you’ll need to speak with your retirement planning advisor, because you may still be responsible for RMDs from other accounts you own.
• A less common exception is what we call “old money.” There’re certain 403(b) plans prior to 1987 that allow you to delay your RMDs until you’ve reached the age of 75 years.
• A more popular exception is a qualified longevity annuity contract (QLAC). When you put money into a QLAC, you’ll avoid RMDs up until the age of 85 years.
• Lastly, if you own a Roth IRA you will not need to worry about RMDs from that account.

And that pretty much sums up the exceptions to the December 31 deadline for RMDs. If you don’t meet any of these criteria, you certainly don’t want to miss the deadline – that could prove a rather expensive mistake.

In today’s podcast, we’re going to focus a little more on Allen’s question, go into some greater detail about these exceptions, and, of course, tackle as many questions from our readers and listeners as we can.

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