When Must Someone Take an RMD?

There are three time periods at which one might take a required minimum distribution from their retirement accounts. Most folks will take their first required minimum distribution in the year in which they turn 70 & ½, but there are some exceptions. Another time period one would begin taking RMDs is when they are over 70 & ½, have a defined contribution plan at their current employer, then sever from employment. The last time period one would begin taking an RMD is if they inherit an IRA.

Taking an RMD at Age 70 & 1/2

Taking an RMD at age 70 & ½ is when the majority of people will begin required minimum distributions. The current IRS ruling gives first time RMD takers a bit of leeway. The IRS says that you must take RMDs April 1st of the year following the calendar year in which you turn the later of 70 & ½ or retire. If you wait until April 1st of the following year to take your first RMD you will also have to take your second RMD in that same year for the current calendar year. 

Example 1: “You are retired and your 70th birthday was June 30, 2017. You reached age 70½ on December 30, 2017. You must take your first RMD (for 2017) by April 1, 2018” (Irs.gov).

Example 2: “You are retired and your 70th birthday was July 1, 2017. You reached age 70½ on January 1, 2018. You do not have an RMD for 2017. You must take your first RMD (for 2018) by April 1, 2019” (Irs.gov).

Taking an RMD after Age 70 & 1/2

Taking an RMD when you retire after the age of 70 & ½ is only applicable if you satisfy three different requirements. First, you must have a defined contribution plan at your current employer. You will not be exempt from taking RMDs out of other IRA accounts, but only out of your current defined contribution plan. The most common type of defined contribution plans is a 401(k) and 403(b). Second, your employer’s plan must specify that you aren’t required to take the distributions out if you are currently working. Lastly, you or a direct family member must not be a 5% or greater owner of the company. The attribution rule states that the ownership of the company can be attributed to and from direct family members such as a spouse, parent, child, or grandchild. If you meet all three requirements then you do not have to take your RMDs from the defined contribution plan until you sever employment.

Example: John is currently working, is age 75, and his 401(k) doesn’t require him to take RMDs out each year. If he severs employment the next year, then he will be required to begin the distributions from his 401(k) in that year.

Taking an RMD from an Inherited IRA

Taking an RMD from an inherited IRA occurs for those who have inherited an IRA and were not allowed to roll it into their own IRA. The IRS says you must take an RMD following the year of death. For example, if the deceased passes away in 2018, the first RMD must be taken by December 31st of 2019. Only spouses may roll an inherited IRA into their own IRA in order to delay taking RMDs, so anyone who is not a spouse must begin taking RMDs from the account based on their own life expectancy even if they are well under the age of 70 & ½. When inheriting a Roth IRA, the same rules apply and RMDs must be taken.

Example: Trevor is 47 years old and was named as the beneficiary on his mother’s IRA. His mother passes away at age 75 in the year 2018. Trevor must take RMDs based on Trevor’s life expectancy. Trevor must also take the first RMD by December 31st of 2019.