Is it Time to Take a Required Minimum Distribution?

If you own a traditional IRA and turned 70 ½ last year, April 1^st is the last day you can take your required minimum distribution (RMD) for 2017. If you miss the April 1^st deadline, the penalty may be a 50% excise tax on the amount you should have withdrawn. Below is a list of things to consider as you plan ahead.

* You must begin taking annual distributions from your traditional IRA once you reach the age of 70 ½. Generally, these distributions must be take place by December 31^st each year. However, a special rule allows you to defer your “first” RMD until April 1st of the after you reach the age of 70 ½. Therefore, if you turned 70 ½ last year, the deadline for your distribution is April 1, 2018. Remember, you will need to take your 2018 RMD before the end of the year.

* The RMD rules do not apply to Roth IRAs.

* The amount of your RMD is based on your age. To calculate your RMD, take the balance of all of your traditional IRAs, as of the last day of the previous year, and divide by a factor representing your life expectancy. You can find a standard life expectancy table, published by the , to help calculate the amount of your distribution.

* If your spouse is more than 10 years younger than you are, special rules may apply.

* It is important that you include your RMD as part of your tax planning because all or part of your distribution may be considered taxable income. If it’s possible, you should start planning for your RMD several years before you reach 70 ½ years of age.

* If you are still employed, this deadline may also apply to your other retirement accounts.

Need help? At Summit CPA we are here to assist you with all of your tax and financial planning needs. For assistance, contact our office at 866-497-9761 to schedule an appointment with our advisors.