Generally speaking, owners of IRAs, SEPs, 401(k) accounts and other similar types of retirement accounts have to begin taking withdrawals from their accounts at age 70 ½. The specific deadline is April 1 of the year after turning 70 ½. This is known as the dreaded RMD.
If retirement account owners do not take at least the minimum RMD they could be faced with a very severe penalty which could be up to 50% of the required amount. For example, if your RMD is $10,000 and you don’t make the withdrawal in a timely manner, you could be subject to a $5000 penalty in addition to the $10,000 withdrawal.
The RMD amount is based on several factors:
- Your age
- Your retirement account balances
- The age of your spouse
There are added levels of complexity including factors such as retirees with multiple retirement accounts, people with annuities held in retirement accounts, and Roth IRAs. For questions about your particular situation, give us a call and see if we can help.