2009 RMD Waiver
I just want verification that this is correct: A self-employed individual who turned age 70 in January 2008 took a 2008 RMD from his SEP-IRA that month, and then made a deductible contribution for 2007. For 2009 he does not have to take a RMD, but can still make a 2008 contribution based on his income. Is that right?
Permalink Submitted by Alan Spross on Sat, 2008-12-20 18:36
That is correct.
Permalink Submitted by fairira on Mon, 2008-12-22 19:52
Does the RMD waiver apply also to qualified plans, specifically to a Profit Sharing Plan?
Thank you.
Permalink Submitted by Alan Spross on Mon, 2008-12-22 20:29
Yes. It applies to all accounts for which an RMD is required including inherited accounts.
Of course, any annuitized IRA will continue to pay out in 2009, as it should.
Permalink Submitted by Al Fry on Mon, 2008-12-22 23:00
Re Alan’s last comment, which is true for almost all forms of annuitization. The hybrid annuitizations (which for IRAs are actually in the form of withdrawals), can be stopped. And of course any of the living benefits can also be stopped. By stopped, I mean suspended for at least 2009.
Permalink Submitted by Steve Salter on Mon, 2008-12-22 23:15
My clients have inherited IRAs and are NOT 70 1/2. In fact some are still in their 40s and just started withdrawing in 2008. Can they suspend their single life RMD for 2009?
Permalink Submitted by Alan Spross on Mon, 2008-12-22 23:44
Yes, they can.
There is no age 70.5 limitation to the relief, which is a source of confusion because many explanations of it start with a statement that RMDs are required starting in the year taxpayer reaches 70.5. But the relief is not limited by age.
In addition, for any beneficiary under the 5 year rule, 2009 is treated as if it did not exist.
With respect to the RBD definition defining the time of a taxpayer death, there is no change. In other words, if you pass after your RBD in 2009, the 2009 RBD remains, so taxpayer is still deemed to have passed after the RBD. The RBD is not suspended until 2010.
Permalink Submitted by Tim Culbertson on Tue, 2008-12-23 18:03
I have 2 clients who have turned 70 in July 2008. Under the new rule, will they have to take distributions in 2009
Permalink Submitted by Al Fry on Tue, 2008-12-23 18:51
Since they will not be 70 1/2 until 2009, that is their first distribution year. Since RMDs are suspended for 2009, they should not have to make a RMD for 2009.