What David Giertz Says Advisers Need to Know About RMDs at the End of the Year

It is the end of the year again. If you are a retirement advisor, you need to remind your clients not to miss a required minimum distribution from their IRAs or retirement plans from their companies. There are penalties for missed required minimum distributions of up to fifty percent. If a required minimum distribution is missed, then you will have to file a form explaining the reason you missed it to the Internal Revenue Service. If you do that, the penalty can be waived, but it is better not to get to that point by simply not missing an RMD.

If you are an advisor, you should start by taking into account all the retirement plans that are subject to required minimum distributions. Of course, there are some plans that do not require it. For example, if the client is over seventy years and six months, does not own more than five percent of the company, and is not yet retired, then the required minimum distribution can wait until they retire.

The problem with this last kind of company plan is that the required minimum distribution will be due by April of the following year. Until the required minimum distribution is satisfied, you can not roll the money over into an IRA. Many people make the mistake of doing the rollover right away before the RMD is satisfied. If that happens, there will be an excess amount of money that you will have to remove. You will have to do this by the middle of October of the next year. If you do not do this by then, then there will be a six percent penalty.

When satisfying the required minimum distribution, there are certain aggregation rules that have to be taken into account. For example according to David Giertz, you can not take money out of an IRA in order to satisfy the required minimum distribution of a 401 (k). This applies to any two types of plans, as one can not satisfy the RMD for another. When calculating the RMD, make sure to use the IRA balance at the end of the previous year.

Find out more about David Giertz: https://patch.com/ohio/cincinnati/learning-meaningful-retirement-planning-industry-expert-david-giertz

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