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AGE 70 Required Minimum Distribution
You have worked hard to build your nest egg by contributing to retirement plans that offer tax advantages. At age 70, the Internal Revenue Service requires most people to begin withdrawals from their tax-deferred retirement plans. Failure to meet the IRS requirements can subject individuals to a 50% federal tax penalty.

Q. What are Required Minimum Distributions?

A. Required Minimum Distributions (RMDs) are minimum amounts that must be removed annually from tax-deferred retirement plans after you attain age 70. Tax-deferred retirement plans include Traditional IRAs, 403(b) Tax Sheltered Annuities (TSAs) and 401(a) qualified retirement plans. 401(a) qualified retirement plans include, but are not limited to: profit sharing, stock bonus, target benefit, money purchase, and 401(k) plans. Roth IRAs are exempt from the RMD rules.

Q. What is the deadline for receiving RMDs?

A. Normally, the RMD must be removed from your tax-deferred retirement plan by December 31 each year. However, the deadline for your first RMD is typically April 1 of the year following the year you attain age 70. If you wait until April 1 to remove your first RMD, you must remove the equivalent of two RMDs during the second calendar year. One for the first RMD by April 1 and a second RMD by December 31.

In addition, if you are a participant in a 403(b) or 401(a) qualified retirement plan and are (1) less than a 5% owner of the business sponsoring the retirement plan and (2) are still employed by the employer sponsoring the plan, you may delay your first RMD until the later of: (1) April 1 following the year you attain age 70 or (2) April 1 following the year you retire.

Q. What taxes or penalties apply to myRMD?

A. The assets within your retirement plan have grown tax-deferred to help build your retirement nest egg. Therefore, amounts that represent a withdrawal of tax deductible contributions and tax-deferred earnings are taxed as ordinary income during the year they are removed from your retirement plan. However, you will not be taxed on any portion of your RMD that represents a withdrawal of nondeductible Traditional IRA contributions or after-tax employee contributions to a 401(a) qualified retirement plan. If you have made non-deductible Traditional IRA contributions use the IRS form 8606 to calculate the taxable portion of your RMD.

Q. How do I determine the amount of my RMD?

A. To determine your 70year, you add six months to your 70th birthday. Use the chart below to calculate your 70 Year:

If your Birthday is
on or between:
Your 70
Year is:
January 1
and June 30
The Current
July 1 and
December 31
The Following

Q. What is my life expectancy factor?

A. Your life expectancy factor is a number, based on IRS actuarial tables, which represents how long the IRS expects you to live. Life expectancy may be determined three (3) ways:

  1. Single Life Expectancy is determined using your own life expectancy.
  2. Joint Life Expectancy is based on the combined lives of you and your oldest primary beneficiary which may be a spouse or non-spouse beneficiary.
  3. The Minimum Distribution Incidental Benefit Rule (MDIB) generally applies when your oldest primary beneficiary is a non-spouse beneficiary with an age difference of greater than 10 years. The MDIB rule requires plan participants with non-spouse beneficiaries more than 10 years younger to use a joint life expectancy of no greater than the joint life expectancy of a beneficiary 10 years younger than the plan participant.

Q. As I get older, how is my life expectancy factor determined in subsequent years?

A.For subsequent years after the initial age 70 year, minimum distributions arc calculated using the appropriate year-end value and your adjusted life expectancy. By April 1 following your 70 year (the required beginning date), you generally must make an irrevocable written election as to how your life expectancy will be determined for years following the age 70 year. The two ways of determining life expectancy after the age 70 year are: (1) recalculate or (2) non-recalculate.

The recalculate method may be used with single life expectancy or joint life expectancy with a spouse beneficiary. With the recalculate method, the IRS unisex life expectancy tables are referenced annually to determine the appropriate life expectancy factor. A non-spouse beneficiary's life expectancy may not be recalculated.

The non-recalculate method is also referred to as the ‘term certain" or "declining years" method. With the non-recalculate method, the life expectancy factor determined in the age 70 year is reduced by one for each subsequent year after the age 70 year.

Q. Will the amount of my RMD remain the same every year?

A. No. Your RMD amounts may differ from year to year as your year-end account value and life expectancy change.

Q. May I remove more than the required minimum amount?

A. Yes, the RMD amount is merely a minimum amount. In any given year, you may withdraw more than the minimum amount, but you cannot apply any additional amounts from earlier years to RMDs in future years.

However, withdrawal amounts from 403(b) or 401(a) qualified retirement plans that exceed the required minimum distribution amount are subject to mandatory 20% federal withholding.

Q. If I have multiple IRAs or TSAs may I combine my RMD amounts?

A. The amount of your RMD must be calculated individually for each of your IRAs or TSAs; however, the actual distribution received may be removed from any one of your IRAs or TSAs. In fact, multiple RMDs may he aggregated and removed from a single IRA or TSA. However, IRA RMD amounts may not be taken from TSAs, and TSA RMD amounts may not be taken from IRAs.

This "combination rule" does not apply to 401(a) qualified retirement plans.

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