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As we edge closer to the last few months of the year, some retirement investors must consider their required minimum distribution (RMD) amounts. Excluding the first RMD, those 70 ½ or older must take these required distributions by December 31 of each year. If you don’t take your RMD amount by the applicable deadline, the amount not withdrawn is taxed at a whopping 50%. Visit the IRS page for more general information on RMDs.
So if you’re 70 ½ or older, you should know your options when it comes to RMDs. Today we focus on a few ways Traditional IRA holders might attempt to satisfy those requirements.
You may take an aggregate amount from one or any combination of Traditional IRAs to satisfy the RMD, but you may not take a distribution from a Roth IRA or other qualified plans to satisfy Traditional IRA RMDs.
Referencing 26 CFR 1.408 (particularly Q-9 and A-9), you may total the separate RMD amounts for each Traditional IRA and take that total from any one or more of those IRAs. This generally applies to amounts in the IRAs held by the IRA holder (not those held by the IRA holder as a beneficiary).
Those same regulations state that you may not take a distribution from a Roth IRA to satisfy a Traditional IRA RMD. Also off-limits in this instance would be 401(a), 403(a) and 403(b) plans. According to IRS Notice 88-38 (1988-1 CB 524), distributions from qualified plans under section 401(a) or qualified annuity plans under section 403(a) will not satisfy IRA distribution requirements. And according to 26 CFR 1.408 A-9, neither will distributions from section 403(b) contracts or accounts.
The IRS also states that RMDs from other types of retirement plans like 401(k) and 457(b) plans must be taken separately for each such account.
It is up to you and your team of professionals to determine how best to interpret those various statements by the IRS as they may pertain to your individual situation. Feel free to click on any of the links above for more information about this topic.
Should you be ready to take a distribution from your Kingdom Trust IRA, visit our Manage My Account page to download our IRA Distribution Request form.