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 The topic of Minimum Required Distributions or MRD focuses on individuals who have investments in annuities/pensions and are making withdrawals or have not taken withdrawals and are about to reach their 70 1/2 birthday.
Monies put into these investments has grown interest free during the accumulation period and once the individual reaches 70 1/2, then the IRS requires the individual to start making tax payments based on a life expectancy actuarial table. This table identifies a percentage that must be applied to all applicable investments in determining the minimum required distribution amount.
If you are age 70 1/2 or greater or know of someone who is this age, and have annuities and/or pensions, and if you haven't already started taking withdrawals from these investments, then you or that person might become subject to Minimum Required Distribution. Make sure you completely understand how this applies to you before requesting a distribution.
If you are subject to MRD, the Internal Revenue Service requires that you start withdrawing a percent of the total of like investments per year. The amount is based on a life expectancy table and changes each year as you grow older. However, being subject to MRD does not mean you have to withdraw a percent from each investment of the same kind. You can choose which investment you take the money from so long as the total being withdrawn is at least equal to your total MRD.
For example: if you have three annuities, the sum of the annuities is what is used to determine the MRD amount. You can withdraw the MRD amount equally from all three annuities or take the whole MRD amount from just one of the annuities.
Two pretty good reference sites that can provide more information and help you determine the effect of MRD on you are: www.kiplinger.com/php/ira/question.htm and atyourservice.ucop.edu/forms_pubs/checklists_factsheets/
minreqdist.pdf
If you get confused, consult a financial advisor or accountant before you do anything, but do make sure you comply with the date that the MRD is effective.
About the Author - Minimum Required Distributions: Tips and Information
Mr. Jersey has worked in the financial services industry for over 30 years. |
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