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December 17, 2012

Required Minimum Distributions from IRAs and Defined Contribution Plans

You may have read (possibly in one of my posts) or heard that when you are 70 1/2 you are required to start taking distributions from your Individual Retirement Plans (IRAs) and Defined Contribution Plans (generally profit sharing plans).  The distributions are called Required Minimum Distributions (RMD).  The Internal Revenue Service has posted on its website some useful tools to help understand the rules.
The RMD Comparison Chart (READ MORE) provides some of the basics.   The chart covers the following questions:
“When do I take my first RMD…”
“When do I reach age 70 1/2?”
“What is the deadline for taking subsequent RMD’s after the first RMD?”
“How do I calculate my RMD?” A link is provided to a distribution worksheet (READ MORE).
“How should I take my RMDs if I have multiple accounts?”
“May I withdraw more than the RMD?”
“May I take more than one withdrawal in a year in a year to meet my RMD?”
“What happens if I do not take the RMD?”

There are links to other resources.

These resources are very helpful in understanding the general rules.  Unfortunately they do not highlight the planning opportunities.  Titleling of the accounts and naming beneficiaries are 2 areas that require a deeper understanding.  Not considering these and other technical areas may result in an outcome that is not consistent with your financial planning.  This could result in reducing the funds available to you and your heirs.  Everyone should review their planning periodically.  Annually the titling and beneficiary designations should be reviewed.  Life events may require changes that might not otherwise be made.


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