New Required Minimum Distribution Rules for Retirees

posted in: Income Tax | 0

New rules have been established for Required Minimum Distributions (RMDs). Late in 2018, President Trump signed the Secure Act which changes the age for taking RMDs from 70 1/2 to age 72. This only applies to people under age 70 1/2 by April 15, 2020. You generally must begin taking annual required minimum distributions (RMDs) from tax-favored retirement accounts (traditional IRAs, SEP accounts, 401(k) accounts, and the like) and pay the resulting income tax from this income. However, you need not take RMDs from any Roth IRA(s) set up in your name.

Additionally, there is no longer an age restriction for making Traditional IRA contributions. Previously, you had to be under age 70 1/2 in order to make Traditional IRA contributions.

Finally, for those non-spouses inheriting an IRA, the former rules stated that the funds could be paid out over the life expectancy of the recipient. The new rules state that the funds must be paid out within 10 years of the death of the IRA account. Note: There are other specifics surrounding inheritances that affect this rule. Consult your tax advisor to see if these specifics pertain to your situation.