Confused about RMDs? Here’s some clarity

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 Q. When it comes time to take Required Minimum Distributions (RMDs), do we have to take a certain percentage from each institution or can we take the entire RMD from one or two accounts? I would prefer to take the withdrawal from the account with either the lowest returns or the lowest balance to tidy up things for my heirs.

A. The IRS mandates that a Required Minimum Distribution (RMD) be withdrawn from a person’s retirement accounts each year.

“It is the minimum amount you must withdraw from your retirement accounts,” said Anthony Vignier, a certified financial planner and attorney with Vignier Investment Group in Kearny. “This must be done, generally, when you reach age 70½.”

Of course, you can withdraw more than the minimum required amount if needed. Roth IRAs do not require withdrawals until after the death of the owner, he said.

Vignier said the RMD withdrawal is included in your taxable income. You generally have to take an RMD from any retirement account to which you have made tax-deferred contributions or had tax-deferred earnings. Examples of these accounts include, Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, 457 retirement plans, pension and profit sharing plans.

Calculating your RMD can be tricky and depends on the type of account you have.

“If all your accounts are IRAs, you can calculate the RMD for each IRA separately, add the amount up and withdraw the total from one IRA,” he said.

But if you have an inherited IRA, you must take the RMD from that account, Vignier said. You cannot mix this RMD withdrawal with your other IRAs. But if you have several inherited IRAs that came from the same person, you can aggregate the inherited IRAs RMDs and take the total from one.

RMDs for accounts other than IRAs must be calculated and paid separately from your IRAs, Vignier said.

“So as an example, you cannot take an employer plan RMD like a 401(k) from an IRA or vice versa. If you have multiple 401(k) accounts RMDs must be taken from each employer plan that you might have,” he said.

Plus, 403(b)s can be treated like IRAs, he said, so if you have several 403(b) retirement plans, you can calculate each RMD, combine that amount, and take the total RMD from any one of the 403(b) accounts you own.

Calculating exactly what amount you must take also varies, and can be determined from the three IRS tables: Table I (Single Life Expectancy), Table II (Joint Life and Last Survivor Expectancy) and Table III (Uniform Lifetime).

“Table I is for an inherited IRA if either of the following applies: You are an individual and a designated beneficiary, but not the owner’s surviving spouse and sole designated beneficiary, or the beneficiary is not an individual and the owner died on or after the date of their RMD,” said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

He said Table II is used by owners whose spouses are more than 10 years younger. Table III is used by either unmarried owners, married owners whose spouses are not more than 10 years younger, and married owners whose spouses are not the sole beneficiaries of their IRAs.

For more information see IRS Publication 590.

Also, it is always a good idea to confirm that you are taking RMDs correctly by speaking to your tax professional.

“Penalties for failing to do so are hefty so it is always a good idea to have someone double check what you are doing,” Vignier said.

Email your questions to moc.p1600717369leHye1600717369noMJN1600717369@ksA1600717369.

This story was first posted in February 2015. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.
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