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Investor Insights Blog|Required Minimum Distributions (RMDs): Frequently Asked Questions

Managing Your Account

Required Minimum Distributions (RMDs): Frequently Asked Questions

required minimum distribution

Did you know that certain types of retirement accounts require that you withdraw money from them each year after you reach a certain age? These withdrawals are known as required minimum distributions or RMDs. If you have a retirement account, it’s important to learn whether you need to make these distributions, as well as when and how to do it.

What You Need to Know About RMDs

1. What is a required minimum distribution?

Retirement account owners with Traditional IRA, SEP IRA, SIMPLE IRA, 401(k), and 457(b) plans are required to begin taking minimum distributions from the account when they reach age 72 and continue taking these annual minimum distributions for as long as they hold the account.

2. When do I have to begin taking RMDs?

You must begin taking required minimum distributions after you reach age 72. The IRS gives you until April 1 of the year following the calendar year in which you reach age 72 to make the first withdrawal.

(Note: The minimum age is 70½ for those who turned 70½ before January 1, 2020.)

3. What is the deadline to take a required minimum distribution?

Your RMD must be withdrawn by December 31 of each calendar year for as long as you hold the account.

4. I have multiple Traditional IRAs. Do I have to take an RMD from each of them each year?

While you must calculate the RMD for each IRA you own, you may choose to withdraw the total amount from just one account (or from a combination of accounts of your choosing). It does not matter whether these accounts are held with the same custodian or with multiple custodians.

However, if you own a 401(k) or 457(b) plan, you must take RMDs separately from those accounts.

5. How do I calculate my required minimum distribution amount?

From the IRS: “The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’s ‘Uniform Lifetime Table.’”

The IRS provides worksheets to help you calculate your distribution amount.

6. May I withdraw more than the RMD amount from my account?

Yes, once you’ve reached age 59½ you’re able to withdraw any amount you wish from your account penalty-free.

7. What if my IRA funds are tied in up illiquid assets such as real estate or gold?

As noted above, if you have multiple IRAs you may choose to take your total required distribution from just one account. If one account holds illiquid assets and the other holds liquid assets, it may be easier to take a withdrawal from the account with liquid assets.

If your IRA’s value is primarily in alternative (and illiquid) assets, such as real estate, promissory notes, or gold, you may be faced with a challenge. Consulting with a qualified tax professional or financial advisor can assist you in evaluating your options to determine the best approach. When your account holds an asset such as real estate, potential options might include:

  • Selling the entire asset from the IRA and taking the RMD from the cash proceeds of the sale
  • Distributing only a portion of the asset as part of the RMD and keeping the remaining portion in the account: This would require a title change and re-registration of the asset with the custodian

If you choose to distribute a portion of the asset personally, there are processes to make sure the asset’s value is up to date and you have the asset re-titled to reflect the change of ownership. Contact Equity Trust to determine the process and documentation needed to facilitate the distribution, revaluation, or sale of the asset.

Again, a financial professional can review the aspects of each option with you.

8. How can I easily take distributions from my Equity Trust IRA?

Provided you have the funds available, you can take a distribution from your Equity Trust Traditional IRA, SEP IRA, or SIMPLE IRA through our online account management system myEQUITY: simply navigate to Money Movement > Distribution to get started.

9. Where can I find more information on RMDs?

Visit the IRS website for the details and rules regarding required minimum distributions.

 

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