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February 16, 2009

Required Minimum Distribution (RMD)

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Definition

The minimum amount that must be withdrawn from retirement accounts, including qualified plans, 403(b) accounts, 457(b) accounts or IRAs, each year. For retirement account owners, required minimum distributions (RMD)s must begin from the retirement account by the participant’s required beginning date (RBD), and must continue for each year until the participant dies.

When the participant dies, the beneficiary must continues to take RMD amounts, as permitted under the plan and/or elected by the beneficiary. The RMD rules do not apply to Roth IRA owners.

They do apply to Roth IRA beneficiaries.

Referring Cite

IRC §401(a)(9); Treas Reg §1.401(a)(9)/Final RMD Regulations-TD 8987

Additional Helpful Information

  • The beneficiary must take the RMD for the year of death, if the retirement account owner dies in an RMD year, and fails to withdraw the RMD for the year of death. This amount it is reported under the beneficiary’s tax identification number, and included in the beneficiary’s income.
  • If the participant fails to withdraw the RMD amount by the applicable deadline, he/she will be subject to an excess accumulation tax of 50% of the shortfall. IRC §4974(a); Treas. Reg. §54.4974-1

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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