February 23, 2015
What is the RMD? When does it kick in? What type of account does it apply to? What is the penalty if you fail to take it?
What is the RMD? When does it kick in? What type of account does it apply to? What is the penalty if you fail to take it?
A RMD is a required minimum distribution and it applies to several types of IRA accounts. These distributions must be made beginning April 1 after the year the account holder turns 70. 5 and each following year. The penalty for failing to take it is s 50% of the amount not taken.
The RMD is the required minimum distribution and that is the time that you are required to start taking a portion of your retirement account out. The RMD applies to retirement accounts that are not a Roth IRA. You are required to start taking payments out of your account the year that you turn 70 and a half. If you do not take the required minimum distributed you are hit with a tax that is 50% of the amount you needed to take out. You want to avoid having to pay that penalty tax at all cost due to you losing half the money for not using the money. Most retirement accounts require this RMD and should be looked at carefully. A roth ira does have a rmd once the owner of the account dies you need to move it to a new owner in a timely manner.
You both did a great job with the details. Let’s review.
(1) The required minimum distribution kicks in at 70.5 for pre-tax, qualified retirement money. That excludes Roth retirement money, which has no RMD.
(2) Not taking it will cause you to get hit with a 50% tax penalty on what you should have taken.
(3) Take control of the situation by tracking YOUR money carefully. It’s YOUR money!