Question

Maxine turns 70-1/2 on may 25, 2020. By what date must she take her first required minmum distribution from her traditional IRA?

Answer 1

What Is a Required Minimum Distribution (RMD)?

A required minimum distribution (RMD) is the amount of money that must be withdrawn from a traditional, SEP, or SIMPLE IRA account by owners and qualified plan participants of retirement age.

As of 2020, participants must begin withdrawing from their retirement accounts by April 1 following the year they reach age 72 (prior to 2020, the RMD age had been 70.5 years old). The retiree must then withdraw the RMD amount each subsequent year based on the current RMD calculation.

Understanding Required Minimum Distribution (RMD)

An RMD acts as a safeguard against people using a retirement account to avoid paying taxes. Required minimum distributions are determined by dividing the retirement account's prior year-end fair market value by the applicable distribution period or life expectancy. The IRS has a worksheet to help taxpayers calculate the amount they must withdraw.

Some qualified plans allow certain participants to defer the start of their RMDs until they actually retire, even if they are older than age 72. Qualified plan participants should check with their employers to determine whether they are eligible for this deferral.

It should be noted that an investor must withdraw the required minimum distribution but may withdraw above that amount. If an investor wants to withdraw 100% of the account in the first year, that's perfectly legal, but the tax bill could be a shocker.

KEY TAKEAWAYS

• The required minimum distribution is the amount a person must take out of their account to avoid tax consequences.
• Retirees can and do take more than the RMD.
• If you have multiple accounts, you will usually need to calculate the RMD for each separately and may have to take an RMD from each.

As per the above explanation , Maxine must begin withdrawing from her retirement accounts by April 1 following the year she reach age 72 . Date must she take her first required minimum distribution from her traditional IRA will be 1/04/2022.