Hopefully, by the time you are near retiring or are retired, you will have enough money in your retirement accounts to comfortably live off of. During retirement, you can use this money however you see fit, is important to note that you cannot keep these funds in your account indefinitely, and there comes a certain time you have to start taking a ‘required minimum distribution’, which we will dive more into later. There are retirement accounts that the required minimum distribution applies to, and if you have any of the following retirement accounts, the rules do apply:

• Traditional IRA
• SEP IRA
• Simple IRA
• 401(k) plans
• 403(b) plans
• 457(b) plans 
• Profit Sharing Plans 
• Other Defined Contribution Plans

So, what is this required minimum distribution? A ‘RMD’ is the minimum amount of money you must withdraw from your retirement account each year. You can withdraw more than this amount of course, but no less, and the amount you personally may have to withdraw may be different than someone else, depending on a multitude of factors. You can find out the exact amount by checking out the Required Minimum Distribution Worksheets on the IRS website. You can also see the exact age you have to take your first RMD by using the RMD Comparison Chart from the IRS as well.

In general, the timeline for the beginning date for your first RMD for different types of accounts is as follows:

IRAs (including SEPs and Simple IRAs)

• April 1^st of the year following the calendar year in which you reach age 70 ½, if you were born before July 1^st, 1949
• April 1^st of the year following the calendar year in which you reach age 72, if you were born after June 30^th, 1949

401(k), 403(b), profit-sharing, or other defined contribution plans

Generally April 1^st following the later of the calendar year in which you:

• Reach age 72 (age 70 ½ if born before July 1^st, 1949), or
• Retire (if your plan allows it)

Just like if you pull money out of your retirement accounts too early before 59 ½ (10% penalty tax), there are consequences for failing to take the RMD or not taking distributions large enough to meet the RMD requirement to be wary of. In either case, you may have to pay a 50% excise tax on the amount not distributed (withdrawn) as required, so it is vital to make sure you know when to begin your distributions, which you can consult with one of our representatives about.

There is a lot to consider when deciding when to take distributions from your retirement accounts, and that is why Ken and the representatives here at Mahoney Asset Management take the time to learn your specific situation, understand your needs, and navigate you along the GPS system. If you have any concerns or questions about your situation, our staff is on call to help and set up a meeting. We also urge our clients to check out some resources on IRS.gov to understand more about this specific matter of the RMD and other retirement implications.