How Early Can I Take My First Rmd?

Can a Participant Get a Jump on RMDs & Starting time Taking Them a Few Months Early?

This QOTW has been updated to reflect changes made past the SECURE Deed, which was signed into constabulary on Dec twenty, 2019.

Participants who were born on or before July 1, 1949, are required to commencement taking their RMDs in the year they turn 70 ½.  Those born afterwards that date are subject to RMDs on reaching age 72.

Facts

One of the not-owner participants in our 401(g) program will exist turning 72 in April of 2021.  The participant knows her first RMD is due no subsequently than April one, 2022, merely she has asked whether she has to wait that long to actually withdraw the money.

Question

Could she accept her first RMD in 2020?  What nigh old in 2022 simply before she turns 72?

Answer

Before answering your question, allow'due south rapidly review the general timing for required minimum distributions.  The deadlines vary based on whether or non a participant owns more than five% of visitor sponsoring the programme.

• 5% Owner | These participants are required to take their first RMD no later on than April 1^st of the year following the year in which they attain age 72.  This is true whether they are retired or continuing to work.  Subsequent RMDs must exist taken by each December 31^st, thereafter.
• Non-possessor | The rule for non-owners is like except that they can choose to wait until April 1^st of the year following the later of the twelvemonth they reach age 72 or the year they actually retire before taking their showtime RMD.  Over again, each subsequent distribution is required by December 31^st of each yr.

Now back to your question.  Assuming she is retired, your participant will be happy to hear she doesn't accept to wait until Apr 1, 2022 to have her first RMD, but she also cannot take information technology during 2020.  To be eligible to take an RMD, a participant must expect until his or her initial "Distribution Calendar Year." This is defined as the yr in which the participant turns historic period 72.  Connecting the dots, your participant could take her distribution at whatsoever point during 2022 to satisfy the RMD.

There are a couple other considerations to go on in mind.

• The participant must satisfy the RMD rules separately with respect to each company-sponsored plan where she has a balance, but all IRAs can be aggregated and the RMD satisfied by taking a sufficient amount from any one of them. Equally a result, it might make more sense (logistically and in terms of fees) for her to rollover her unabridged residuum from your plan in to an IRA and accept RMDs from at that place.
• With that said, RMDs are not eligible to be rolled over. That means she would take to consummate the rollover in 2022 to avoid an RMD from your program. If she waits until 2021, she would outset accept to take the RMD from the plan and then rollover the remainder into her IRA.
• If the participant is yet employed, she would not be entitled to accept an RMD until she retires. Yet, if your plan permits in-service distributions, she could access her account that mode.  It might seem like a difference without a distinction, but an in-service distribution is subject to unlike federal taxation withholding requirements than RMDs and can also be rolled over.

There are a lot of nuances to the RMD rules, then it'south always a skilful thought to double-check if you lot are unsure how to proceed…but like you did here.For more information on required minimum distributions and program distributions in general, please visit our Knowledge Heart here , here and here .

Topics: Question of the Calendar week (QOTW), Required Minimum Distribution (RMD), In-Service Distributions, Plan Distributions

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Source: https://www.dwc401k.com/blog/can-a-participant-start-taking-required-minimum-distributions-a-few-months-early

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