3rd Quarter 2019

Retiree Corner: How to Plan for Required Retirement-Savings Withdrawals

How to Plan for Required Retirement-Savings WithdrawalsAfter you turn age 70½, you must start drawing down retirement account savings from your 457 plan, any 401 plans, and traditional IRAs. Consider these key planning strategies for your annual required minimum distributions (RMDs).

Know how to calculate RMDs. The required amount is determined by dividing your year-end account balance from the previous year by an IRS life-expectancy factor based on your age in the current year (see IRS Publication 590-B at www.irs.gov). You’ll need to calculate the RMD and withdraw the required amount separately from each 457 or 401 account. If you own multiple traditional IRAs, you’ll need to calculate the RMD for each account, but you can take the required amount from any one or more of your traditional IRAs (RMDs don’t apply to Roth IRAs).

Think carefully before delaying. You generally have to take your RMDs by Dec. 31 each year, but you have extra time to take your first required withdrawal — until April 1 of the year after the year you turn age 70½. If you delay, however, you’ll have to take two RMDs in one year — and that could bump you into a higher tax bracket. If you do not take your RMD in time, the distribution may be subject to a 50% excise tax penalty.

Consider automatic withdrawals. You can handle these withdrawals more efficiently by signing up to have ICMA-RC distribute your RMD automatically each year, or pay out a portion each month, quarter, or semi-annually. Get more details at www.icmarc.org/rmd.

Return to top