What is a Required Minimum Distribution?

When you turn 70½, with few exceptions, tax law requires that you begin taking withdrawals, known as Required Minimum Distributions (RMDs), from your tax-deferred retirement accounts.  This includes your traditional IRAs, 401(k)s and 403(b)s, such as your JRB 403(b) retirement account.  The RMD is the least amount you must withdraw from your tax-deferred retirement accounts each year. Note that Roth IRAs are not subject to the RMD during your lifetime.

There is one major exception to the rule, as it applies to The JRB 403(b)(9) Retirement Plan.  If you are still working within the Conservative Movement, you are exempt from the RMD for your JRB account until you retire. This exception, however, generally does not apply for your other retirement accounts. Therefore, even if you are exempt from taking an RMD from your JRB account, you will most likely need to take withdrawals from your other tax-deferred retirement accounts if you are 70½ or older.

 

 When Must I Take My First RMD?

You must begin taking distributions from your tax-deferred retirement accounts by April 1 of the calendar year following the year you reach age 70½.  For example, if you turned 70 before June 30, 2017, you turn 70½ in 2017 and, therefore, you must take your first RMD by April 1, 2018.  (You also can take your first RMD by the end of 2017.)  If you turn 70 on or after July 1, 2017, you turn 70½ in 2018 and must take your first RMD (for 2018) by April 1, 2019 (or by the end of 2018). 

Once you begin taking your RMD, you must continue taking it annually by the end of the year.  For instance, if you are 71 or older this year, you must take your RMDs from all of your tax-deferred retirement accounts by the end of 2017. If you still are working in the Conservative Movement, however, you are exempt from taking your JRB RMD until you retire.

How Much Money Must I Withdraw?

The formula for calculating the RMD generally is based on your age and the balance in your account at the end of the previous year (for those who are 70½ and older in 2017, it is based on your JRB account balance on December 31, 2016).  The balance is divided by a life-expectancy factor published in the IRS Actuarial Tables.  For example, the factor for an individual who is age 70 is 27.4 years; accordingly, if you are 70½ and required to take an RMD in 2017 and your account balance on December 31, 2016 was $100,000 then your 2017 RMD is $3,650 ($100,000/27.4).

Penalties

If you fail to withdraw your RMD on time, a 50% excise tax is imposed on the amount not distributed.  For example, if your RMD is $10,000 but you have not withdrawn that amount by the deadline, you will pay a penalty to the IRS of $5,000.  Therefore, it is imperative that you withdraw your RMD from all of your tax-deferred retirement accounts, in order to avoid such an onerous penalty.

Taxes

Distributions from your tax-deferred retirement accounts, including RMDs, are taxed as ordinary income and are subject to federal, and most state, income taxes.  An exception exists for retired clergy whose distributions are tax-free to cover a housing allowance. 

The JRB Advantage

The JRB makes it easy for you to comply with the RMD rules: 

  • We remind you when you must take an RMD.
  • We calculate the RMD from your JRB account.
  • We distribute the RMD on any schedule you choose – monthly, quarterly, in one lump sum or whenever you request a portion of the distribution.
  • We protect you from penalties by automatically processing the RMD if you do not respond to our reminders.