RMDs | Ed Slott and Company, LLC

RMDs

Client turns 70 ½ in Feb 2019 so have until April 2020 to take first RMD. Circumstances are such that it is best that he waits until 2020 to take his first REQUIRED minimum distribution, knowing that 2 will need to be made in 2020.
The question is that one of his accounts sent him a distribution in 2019. I assume that since he is not required to take them, then it is just a normal distribution and no penalty as he is over the required age limit.
For 2020 – does he still have to take 2 distributions from that IRA since he did not take RMDs from ALL of his accounts in 2019?

  • If a distribution was made in 2019, it is automatically deemed to apply to the 2019 RMD, and that distribution cannot be rolled over. There is no penalty due, just ordinary income tax, the same as for any RMD or non RMD distribution. Client will receive a 1099R for the amount withdrawn in 2019 and it is reportable on the 2019 1040.
  • Under the IRA RMD aggregation rules, the total RMD can be taken in any combination from multiple IRA accounts. The RMDs for each account should be calculated and added together to determine the total RMD for 2019, then the amount already distributed this year will reduce the remaining RMD.
  • The year 70.5 RMD can be deferred in part or in total, so client can still defer the remainder to the 2019 RMD until 4/1/2020. This is not an all or nothing option.
  • For the 2020 RMD calculation, the 12/31/2019 balance is used without adjustment. Therefore, completing the 2019 RMD in 2019 will make the 12/31/2019 balance about 3.7% lower than it would be if the entire 2019 RMD is deferred. The 2020 RMD likewise can be taken from any combination of IRA accounts by 12/31/2020.
 

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