In an earlier post, we reviewed the basics of
Required Minimum Distributions (RMDs). In this post, we will continue the
discussion with some rules about RMDs and mistakes to avoid when you have
multiple retirement accounts.
In
particular, it is important to note the type of retirement account in question.
For 401(k) and 457(b) accounts, RMD must be calculated for and taken from each
individual account. However, for 403(b) and IRA accounts, RMD must be
calculated for each individual account, but the IRS allows individuals to take
the collective total from one or more of the accounts.
To
illustrate, let’s visit the case of John Doe, who is turning 74 in 2015. In
this case, let’s assume he has not one IRA valued at $100,000 as of December
31, 2014, but he has three such IRAs, each with a balance of $100,000 as of
December 31, 2014.
In this
case, his RMD is still calculated for each account as $4,201.68, based on his
factor of 23.8 ($100,000 / 23.8 = $4,201.68). Each of his IRA custodians will
calculate his 2015 RMD and notify John of the amount, which can sometimes get
confusing. This can often lead the individual to believe they must take that
amount from each account.
However,
as we just noted, he can actually take the total RMD from any one or more of
his IRA accounts. So, he has total RMD for 2015 of $12,605.04 ($4,201.68 * 3 =
$12,605.04). John can actually take this total RMD from one or more of his IRA
accounts in any amounts he would like, so long as the total withdrawn is at
least $12.605.04.
Knowing
this, John can selectively choose which account(s) to withdraw from based on
factors such as liquidity and performance.
There are
still other considerations when it comes to RMD such as: RMD when still
working; RMD for charitable donations; and RMD for Roth 401(k)s. That’s why we
at Kemp Harvest Financial suggest you work with a qualified retirement planning
specialist to incorporate all of these issues into your comprehensive
retirement plan.
If we at Kemp
Harvest Financial Group
can help you in any way with regard to your Required Minimum Distributions or
other financial planning needs, please feel free to contact
us.
For more
topics like this, check out our radio show “Retirement Plain and Simple” every
Saturday morning at 8 on WNPV 1440 AM and like us on Facebook!
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Author: Todd
Little, CFP®, AIF®
Todd
Little is a financial planner with Kemp Harvest Financial. Todd is a
CERTIFIED FINANCIAL PLANNER™ professional and has a Bachelor of
Science degree in Economics from Pennsylvania State University. Todd is a
member of the Financial Planning Association and holds FINRA Series 6, 7 and 63
licenses. In addition to meeting regularly with clients, Todd works very
closely with Mark Kemp and our client service staff to create individual retirement
income plans and help our clients navigate the retirement process.