Still Working? You May Be Exempt from Required Minimum Distributions

Still Working? You May Be Exempt from Required Minimum Distributions

You can't keep saving forever. Under their "Required Minimum Distributions" rule, the Internal Revenue Service (IRS) requires people to begin taking money out of their retirement accounts at age 70-1/2. These minimum distribution rules apply to:

Traditional IRAs
SEP IRAs
SIMPLE IRAs
401(k) plans
403(b) plans
457(b) plans
Profit sharing plans
Other defined contribution plans

Once you reach age 70-1/2 (on the date that is 6 calendar months after your 70th birthday) you must take your first RMD no later than April 1 of the following calendar year. So if your 70th birthday is July 1 or later, you may be able to wait until April 1 two years in the future to take your RMD, as you will not be 70-1/2 until after January 1 of the following year. For each subsequent year after your required beginning date, you must withdraw your RMD by December 31.

There are exceptions to the RMD rules. One that is becoming increasingly more common is a taxpayer who remains employed full-time after age 70-1/2. In this case you can wait until you actually retire before beginning distributions from your current employer-provided plan, such as your 401(k), profit-sharing, 403(b), or other defined contribution plan (Sorry, but there is no work exception for IRAs including SEP IRAs or Simple IRAs). An exception to this exception is business owners. If you own 5% or more of the business sponsoring the plan, you must begin taking distributions by April 1 of the year after the calendar year in which you reach age 70-1/2.

You can access a full review of the IRS Required Minimum Distribution rules by clicking here.

If you are nearing age 70-1/2 and have questions about when you must begin taking RMDs, and how much you'll need to withdraw, contact Gray, Gray & Gray 's Tax Department at (781) 407-0300.

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Gray, Gray & Gray, LLP
781.407.0300

www.gggcpas.com

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The information contained in this communication (including any attachments and/or re-directs to other online sources) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.