IRA MISTAKES ON RMD – PART 1 by Paul Ferraresi

RMD or Required Minimum Distribution is the minimum amount you must take from your IRA starting at age 70 ½. If you do not take the amount, then, you are subject to a 50% penalty tax plus the regular income tax on the amount you did not take out.

Many people have multiple IRA’s. IRS rules state you must calculate the RMD for each account separately. Once completed the RMD amounts can be added together. The distribution can be taken in any proportion from one or more of the aggregated accounts.

An RMD cannot be rolled over from any one IRA account to another, and the RMD is considered the first funds distributed from any retirement account during the year.

Say an IRA CD that comes due in February, cannot be moved in its entirety as a 60 day rollover to another retirement account. The RMD amount must be subtracted from the amount that is eventually rolled over.

The same is true for employer plans. All plan distributions are considered rollovers, even when they go directly from the plan to another retirement account.

RMDs for one type of account can never be taken from a different type of account. Example, a 401(k) RMD cannot be taken from an IRA as well as an IRA RMD cannot be taken from a 403(b). A common mistake.

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