This week I’m talking about Required Minimum Distributions, otherwise known as RMDs. When you reach the age of 70 ½, you have to start distributions from your IRA, 401k, and other qualified accounts by the end of each calendar year. It’s a common source of confusion among my clients so I’m covering the questions I get asked most often about RMDs to help you better understand the complicated rules about those mandatory withdrawals. 

Today’s RMD question is: Do I have to take my RMD? 

Good question. The short answer is generally yes, once you reach the age of 70 ½ or if you’re required to take money out of an inherited IRA, then you must begin those distributions by the end of the calendar year in which you turn 70 ½. 

However, there are a couple common exceptions to this rule: 

1. If you are 70 ½ or older, and you’re still working and participating in a 401k plan at work, in most cases you will not be required to take RMDs from your 401k until you stop working. 
2. Another common exception to the mandate on RMDs is in the year you actually turn 70 ½. You can wait until the following year to take your first distribution, but you’ll have to take 2 distributions in that second year, so for many people the extra tax hit in year 2 is reason enough to not delay the first distribution. 

The bottom line is that you’ll want to talk to your financial advisor and/or your tax advisor about whether or not you are required to take RMDs. There are rare exceptions after you turn 70 ½, so it’s good to know if your unique situation qualifies you for one of those exceptions. 

That’s it for today, but before you go, would I be correct in saying that your retirement is perhaps the most important financial decision you’ll ever make? You want to get it right. Well, so do I. For the last 12 years, I’ve been helping clients just like you make the transition into retirement. If you want to talk one-on-one with me about whether or not you can retire, head on over to truenorthra.com, where you can book a 15 minute call with me, at a time that’s convenient for you. The call is confidential, free, and I promise to help guide you on whatever is weighing most on your mind right now regarding your retirement. So head on over to truenorthra.com and book a call today. 

Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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