401k Pension Plans for businesses and Individuals

Required Minimum Distributions, RMD

RMDs Under The New Rules

Required Minimum Distributions must be started by April 1st of the year following the calendar year in which the account holder attains age 70-1/2. If the account is through the account holder's current employer and the account holder does not own 5% or more of the business, the account holder can wait until April 1st of the year following the calendar year he retires, if later. This is called the account holder's Required 

Only in the first year can an account holder wait until the following April 1st. (Consider this to be a little break, in case you forget to start taking your distributions in the first year.)

Calculating the Required Minimum Distribution 

To determine the  current year's RMD, the participant’s account balance as of December  31st of the preceding year is divided by the Distribution Period  corresponding to the account holder's attained age in the current year.  At least this amount must be withdrawn before December 31st of the  current year. RMDs can be taken at any time during the year, in one or  more withdrawals, so long as at least the RMD amount is withdrawn by  year end. Withdrawals from any Tax Deferred Account can be applied  toward the account holders combined total minimum distribution  requirement for all such accounts. The Distribution Period is found in  the Uniform Life Expectancy Table below. Each Distribution Period in the  table is the joint life expectancy of a person at the indicated age and  a second person 10 years younger. The joint life expectancy is the  average time before the second of the two people pass away. This is  always longer than a single life expectancy. This produces a longer  Distribution Period and results in lower RMDs in any given year. Major  simplification is achieved by giving everyone the benefit of this longer  distribution period. The old rules only allowed use of this longer  distribution period if several complex requirements were satisfied. Now,  one need only refer to this Table each year to calculate pre-death  distributions.