A Required Minimum Distribution is the minimum amount that clients must withdraw from their qualified retirement plans each year after they reach age 70½.
Qualified retirement plans include traditional IRAs, 401-ks, company profit sharing plans, and Simplified Employee Pension Plans.
The date for a client’s first Required Minimum Distribution is April 1 of the year following the year in which the client turns age 70 ½.
The minimum amount that must be withdrawn is based on the client’s age in the year of distribution and on the client’s retirement plan account balances at the end of the previous year.
The penalty for withdrawing less than the correct Required Minimum Distribution is 50% of the amount that was not withdrawn. This stiff penalty is a strong incentive to correctly calculate Required Minimum Distributions and make withdrawals on time.
We coordinate our client’s Required Minimum Distributions with other aspects of their Retirement Income & Spending Plan in order to optimize their distributions. We also help clients understand the complex Required Minimum Distribution rules that apply to surviving spouses and other beneficiaries.
In addition, we utilize financial planning tools like Roth Conversions and Qualified Charitable Contributions where appropriate.