What is an RMD and why do I have to take a distribution out of my account?
The Internal Revenue Service (IRS) requires clients to take minimum distributions out of certain IRAs and retirement plans once they reach age 72. Some clients who own an inherited IRA may also have to take an RMD.
Those turning 72 in 2021 or later are subject to RMDs.
What types of IRAs and retirement plans have RMD requirements?
The RMD rules apply to the following:
- Traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs
- Inherited IRAs and Inherited Roth IRAs
Note: RMD rules do not apply to Roth IRAs while the original owner is alive
- All employer sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, 457(b) plans, and Roth 401(k) accounts
When do I have to take my RMD?
- If you are 72 or older, you have until December 31 to take your RMD each year.
- When you turn age 72, your initial RMD may be postponed until April 1 of the following year.
- If you wait until April 1 to take your initial RMD distribution, you will have to also take your subsequent distribution by Dec. 31 of the same year
- Your RMD distribution deadline is provided to you each year on Form 5498, IRA Contribution Information, and on your financial statement.
Note: If you are still employed by your 403(b) employer at age 72, you can postpone taking your initial RMD from your Tax-Sheltered Annuity (TSA) or Tax-Sheltered Custodial Account (TSCA) until retirement. However, we will report the RMD information to you on your financial statement.
Did I already take my required RMD amount out for this year?
- Qualifying distributions that you take during the year from your IRAs or other retirement plans (excluding Roth IRAs) count towards fulfilling your RMD requirement for the year, for the plan that the distribution is taken from.
- Your Ameriprise financial advisor can help you determine if the withdrawals you have taken during the year have met your RMD requirements for Ameriprise Financial investments.
- If you need additional assistance, contact the Ameriprise Service Center at 800.862.7919.
- If you own IRAs or other retirement plans at other financial institutions you will need to contact those institutions directly to verify your RMD information.
Can I take out more than the required minimum amount?
Yes, you can take more than the required minimum amount out of your IRA or retirement plan. Your total distribution amount for the year will be reported on Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and appropriate tax consequences will apply.
Amounts taken in excess of your RMD for the year are not applied toward any future years’ RMDs.
Note: For 403(b) plans, any amount in excess of the RMD would be considered a distribution eligible to be rolled over. These distributions are subject to plan sponsor approval and a 20% minimum federal tax withholding.
Do I need to take an RMD from my Roth IRA?
There is no IRS requirement to take an RMD distribution from a Roth IRA while the original owner is living. There are RMD requirements for beneficiaries who own Inherited Roth IRA accounts. Distributions taken from your Roth IRAs do not count towards meeting RMD requirements from other IRA plans.
What should I do if I forgot to take my RMD?
If you failed to withdraw your RMD, failed to withdraw the full amount of the RMD, or failed to withdraw the RMD by the applicable deadline, contact your financial advisor to ensure that you take the correct amount as soon as possible.
Consult with a qualified tax professional to take any appropriate actions when filing your tax returns.
Will I have to pay a penalty for not taking my RMD out in time?
If you do not withdraw the required amount by the deadline, an IRS penalty (excise tax) of 50% may apply to the required amount that was not withdrawn.