Pay attention to Required Minimum Distribution (RMD) regulations

Article submitted by Simply Credit Help.

You worked hard and stashed away money in 401(k), 457 Plan or in an IRA. Now, here come RMD. The RMD is minimum amounts that you have to withdraw from your retirement account in the year you reach age 70 ½ and every year after that before December 31. It is the retirement plan participant’s responsibility to withdraw the RMD and may face stiff penalties if failed to do so. If the retiree dies before reaching the RMD age limit, then there are certain requirements that apply to the beneficiary. The IRS Publication 590 explains these requirements.

It is not just IRAs and 401(k) plans; RMDs applies to 403(b), 457(b), and IRA based plans such as SEPs, SARSEPs, and SIMPLE IRAs. RMD requirements do not apply to Roth IRA if the owner is living making Roth IRA more appealing than any other retirement saving vehicle. Depending on the day you started contribution to a retirement plan different rule may apply to plans before 1987.

Your retirement fund holder uses the IRS life expectancy table to the fund balance on December 31 to determine the RMD for each year. The RMD makes tax planning more challenging and those who are reaching the age should plan ahead to address the tax burden.