IRS rules dictate a required minimum distribution from your IRA when you have reached 70 1/2 years of age. Most people who meet the requirement for minimum distributions are aware of this rule, but it is always good to have a refresher, especially as some of these rules can start becoming a little confusing.
What I have found to be the easiest way to remember when an individual must take distributions is to just remember that IF you turned 70 1/2 during 2016, you must take your first required minimum distribution from your IRA by April 1, 2017. This rule is applicable to all traditional, pre-taxed IRAs (including SIMPLE and SEP IRAs), and most typically will apply to a qualified plan (e.g., 401(k), 457) as well. Obviously, one exception to the requirement for the RMD does not apply to Roth IRA plans. Besides the tax-free growth and tax-free distributions, the freedom of not having to take an RMD from a Roth IRA is attractive to some folks.
But, keep in mind:
The April 1 date is for the first RMD and, thereafter, RMDs must be taken by December 31. As an example, if you turned 70 1/2 during 2016 and took your RMD by April 1, 2017, (for your first RMD), you would still need to take your 2017 RMD by December 31, 2017.
The IRA trustee has to report either the actual amount of the RMD or offer to calculate it for the IRA owner.
If you are still working and participate in a qualified plan, such as a 401(k), as long as the plan documents for the plan permit, one can postpone their RMDs until April 1 after the year in which retire. For some, including Solo-K trustees may decide to make sure this provision is part of their plan documents. In what some people may believe to be unfair, RMDs from a 401(k) plan with Roth-designated funds (with the noted exception above) must still be taken as a distribution, even though no taxes would be due.
For your reading pleasure, feel free to read the full IRS News Release.
As always, the information provided is intended to be educational in nature. It is not intended, nor should it be interpreted as, any form of tax, legal, financial or investment advice. One must always consult with their respective professional in all such matters.