Archive for October, 2018

IRA Mistakes on RMD #2

IRA Rules
One of the benefits of an IRA is that RMDs for multiple IRA accounts can be aggregated. This includes SEP and Simple IRA accounts. The RMD should be calculated for each account separately, but after that , the RMD amounts can be added together and taken from any one or combination of accounts.

403(b) Accounts
A similar aggregation rule exists for 403(b) accounts. A person with more than one 403(b) account can calculate the RMD for each account and then add the RMDs together. The total amount can then be taken from one or a combination of 403(b) accounts.

Employer Plans
RMDs from employer plans, not including 403(b) plans , SEP, and Simple IRAs, CANNOT be aggregated. A person with multiple 401(k), Government 457(b) or other employer plans must calculate the RMD for each individual plan and take that RMD from that plan only.

Roth IRAs
There is no need to worry about whether Roth IRAs can be consolidated because Roth IRAs have NO RMDs during the account owners lifetime.

Other
Any plan making a series of substantially equal payments over a period of 10 years or more, or over life expectancy, cannot aggregate that payment with the RMD from any other retirement account. The distribution from the account making these substantially equal payments is considered the RMD from that account only.

Next blog will show what happens when you get the aggregation wrong!

IRA Mistakes on RMD- #1 by Paul Ferraresi

RMD or Required Minimum Distribution is the minimum amount you must take from your IRA starting at age 70 1/2. 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 IRAs. The IRS rules state that 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 comes due in February, it 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 one plan to another retirement account.