As winter rolls in and we enter the waning weeks of 2019, several end-of-year tax matters may come to mind. Chief among them are required minimum distributions (“RMDs”), which apply if you hold a pre-tax account (Traditional IRA, 401K, SEP IRA, etc.) and you’re age 70 ½ or higher. As the name implies, an RMD is an annual, IRS-mandated withdrawal of cash or assets from a tax-advantaged account. Those subject to RMDs have until December 31 to withdraw for a given year…unless the account holder turned 70 ½ in said year.
If you turned 70 ½ in 2019 and you hold a pre-tax account, you needn’t worry about the upcoming December 31 deadline; you actually have until April 1, 2020.
Here are few important considerations for 1st-time RMD takers to bear in mind:
- Each year’s required minimum will be calculated based on:
Click here for assistance with calculating your RMD. You may benefit from additional assistance from your accountant or tax professional. Visit your myDirection® page to find your prior year’s account balance (go to Documents on the left-hand side of the screen and find your “2018 Statement”).
- Your account balance as of December 31, the prior year.
- A numerical factor, referred to as a “distribution period,” associated with your age.
- You may distribute cash or in-kind assets. For instance, if your account holds cash-producing assets like peer-to-peer loans, you can draw from your cash balance to satisfy the RMD. If, on the other hand, your account holds precious metals, you could elect to distribute the physical metals themselves. Any asset can be distributed in kind, but individual precious metals items tend to bear lower values than loans, real estate, etc., and thus may align better with your RMD needs.
- Although you have until April 1, 2020 to take your first RMD, the December 31 deadline will apply to all RMDs thereafter. Furthermore, a first-time 2019 RMD taken in 2020 will not satisfy your 2020 RMD in tandem. An additional balance will need to be withdrawn by December 31, 2020.
- If you have multiple pre-tax accounts, each will be subject to an RMD. However, you’re under no obligation to take individual RMDs from each account. For example, if you have three Traditional IRAs and you owe $250 from each one, you could take the full $750 from one and leave the others untouched.
If needed, click the link to complete our Distribution & Notice of Withholding form via DocuSign. For more information about distributions or self-directed investing in general, please give us a call at 877-742-1270 or send us an e-mail at firstname.lastname@example.org.