IRA Planning and Required Minimum Distributions


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You’ve been putting money away for years thinking retirement was a distant point that would never come. Now, it has arrived as promised, and you get to enjoy the benefits of your planning and saving. But the planning doesn’t stop here.  If you don’t continue to plan the details of your retirement account you could lose some of your hard earned savings Required Minimum Distributions (RMDs) are just another of a long line of acronyms and jargon you’ll need to become familiar with in order to plan effectively.

What is a Required Minimum Distribution, anyway?

An RMD is a specific amount that the IRS mandates be taken out of certain retirement accounts starting in the year you turn 70 and a half. The amount must be withdrawn by December 31st of every year after that age. There is some leeway for the first year, and this can be deterred until April of the following year. Doing this means you will have to take out two RMDs that year, and this often places people in a higher tax bracket. Everybody will have a different RMD amount they will need to withdraw from their accounts depending on their age and account balances.

Which Accounts Are Affected by this Requirement?

Accounts that are affected include all traditional retirement accounts, like IRAs and 401Ks. The exception to this is that Roth IRAs are not subject to RMDs. If you have multiple retirement accounts, each of them will have an RMD amount. These should all be tallied up and this total sum can be taken out of any one of the accounts, or some can be taken out of each to arrive at the total. Do not count the money in your Roth IRA towards this total.

Taxes and Fees

The money that is taken out from these accounts has grown tax-free over many years. As a result, when it is withdrawn it is now considered taxable income. Whatever money is taken out, both the RMD and anything over that amount, needs to be reported on that year’s taxes. There are harsh penalties from the IRS for not taking out the full RMD. They will require you to pay 50 percent on whatever the difference is between what you took out and what your RMD amount was supposed to be. In addition to this penalty, you’ll still be required to take out the RMD and pay the appropriate taxes on it. This makes it very costly to not pay attention to your Required Minimum Distribution.

Cardinal Advisors

Cardinal Advisors can help you navigate RMDs and other aspects of retirement to determine the best path forward. Our team at Cardinal is experienced in finding the best strategies for every retiree based on their individual circumstances. Reach out today by calling (919) 535-8261.

Hans Scheil is the author of “The Complete Cardinal Guide to Planning for and Living in Retirement” and the accompanying workbook. He can be reached at

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