Minimum Required Distributions

[kent]

As I understand it, the baseline for MRD's is the account balance on December 31st. As such, a person turning 70-1/2 in 2012 year would use his/her account balance as of December 31, 2011, right?

Let's say the person turns 70-1/2 in 2012 but wants to hold off withdrawing money as long as possible so they decide to wait until April 1st of 2013.

If the person were to do that, how is the MRD calculated? Is it the plan balance at the end of 2012 as well as the end balance at the end of 2013. Some sort of convoluted formula or is it straight forward?

Any taxing agency that comes up with April 1st of the year following the year in which you turn 70-1/2 can't possibly have a simple way of calculating it, right?

[tiredturkey]

The 2012 RMD would be based on the 12/31/11 balance and, yes, you may wait until 4/1/13 to take it BUT the kicker comes in when you must take your 2013 RMD (based on your 12/31/12 balance) by 12/31/13. That means you will have two distributions in one tax year and that can really hurt tax-wise because it's taxed as ordinary income.

DH turned 70-1/2 in 2010 so we've done this particular dance recently.
FYI, for 2011 you can use your RMD and more, up to a max of $100,000 for charitable giving and avoid income tax on it entirely. If you make charitable contributions anyway, this is a really good strategy.

[mwcpa]

good reply above....the double whammy can be a shock to many who push off the RMD when they hit that magical 70 1/2.

and good suggestion for those who want to give to a charity..... that is a very valuable tool many can use to accomplish charitable endeavors and minimize the tax cost (in normal situation the deduction for charitable giving is limited to 50% of AGI)

[commentator]

Apr 29, 2011 18:07:37 GMT -5 kent said:

...
Any taxing agency that comes up with April 1st of the year following the year in which you turn 70-1/2 can't possibly have a simple way of calculating it, right?

Congress came up with that rule.

[kent]

Thanks (as usual) to each of you for your input!