Deadline for RMD's

There’s a deadline in regard to required minimum distributions (RMD’s) coming up that can cost you in penalties and taxes.

 RMDs are a minimum amount of money that the IRS requires you to withdraw from most types of retirement accounts each year starting the year in which you turn 70½. The accounts include Traditional individual retirement account (IRA), Simplified employee pension (SEP) IRA, Savings incentive match plan for employees (SIMPLE) IRA, Traditional 401(k), Roth 401(k), 403(b), and 457(b). Roth IRAs are not subject to RMDs during the original account owner’s lifetime. The deadline for your first RMD — the one for the year in which you turn 70½ — is different. The IRS gives you a little more time to withdraw that first RMD — until April 1 of the following year.

 So, folks who turned or will turn 70½ during 2019 have until April 1, 2020, to take their first RMD. If that’s you, just beware that if you postpone taking your 2019 RMD until 2020, you would end up having to take two RMDs in one year: your first one by April 1 and your second one by Dec. 31, 2020. As a result, you’d likely owe taxes on both of those RMDs in the same year, as RMDs are generally taxable income. And that could hike your tax bill. If you fail to withdraw an RMD in full by any applicable deadline, however, the IRS can penalize you. The agency will tax whatever RMD amount you failed to withdraw on time at 50%.

If you have questions call 320-679-5183 or go to yoursafemoneyshow.com.