2014 IRA Update – Required minimum distributions (RMDs)

Starting at age 70 1/2, Traditional IRA account holders are required by law to withdraw a portion of assets each year as a distribution. It’s important to note that in most cases RMDs only apply to traditional IRAs, not their Roth IRA counterparts.

These required minimum distributions (RMDs) must start by April 1st of the year after you turn 70 1/2. After that, all RMDs must be made by December 31st of that year.

For example, if you turned 70 1/2 in 2014, you have until April 1st, 2015 to take your first distribution and December 31st, 2015 to take your next one. There are significant penalties for not taking your RMD during the correct time-frame, including potentially having the non-distributed portion taxed at 50%.

The RMD amount is determined based on the account holder’s age, the IRA’s previous year balance, and a withdrawal factor, set by the IRS, that is primarily based on life expectancy. TD Ameritrade has a calculator that can help you predict your next RMD.

If you have multiple IRAs held at different institutions, you’ll want to make sure there is a coordinated effort to determine the total RMD amount for all of your accounts.

If you’re a Vodia Capital client, we will be contacting you over the next few weeks to help make sure your distribution is completed accurately and on time.

 

Please do not hesitate  to contact us if you have any questions.

 

Marcus Green