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RMD timing question

Posted: Tue May 14, 2019 1:42 pm
by jpohio
If I turn 70 in August 2019, thus reach 70.5 in February 2020, is my first RMD due in 2020 or 2021, the year after I turn 70.5? If I am understanding the IRS language correctly, the requirement is to take the RMD no later than April 1 of the year following the year I turn 70.5, which means the first RMD would be due in 2021. If I wait until April 1 of 2021 to take the initial RMD, do I also need to take a second RMD by 12/31/2021?

Thanks.

Re: RMD timing question

Posted: Tue May 14, 2019 1:45 pm
by sport
You are required to take an RMD every year starting with the year you turn 70.5. That would be 2020 for you. You can defer the first year RMD up until April 1 of the following year, or 4/1/2021. You will still be required to take the second RMD before 12/31/21. Thus, deferring into 2021 would mean two RMDs, and the associated taxes, for that year.

Re: RMD timing question

Posted: Tue May 14, 2019 1:48 pm
by jpohio
Thank you.

Re: RMD timing question

Posted: Tue May 14, 2019 2:06 pm
by trueblueky
jpohio wrote:
Tue May 14, 2019 1:42 pm
If I turn 70 in August 2019, thus reach 70.5 in February 2020, is my first RMD due in 2020 or 2021, the year after I turn 70.5? If I am understanding the IRS language correctly, the requirement is to take the RMD no later than April 1 of the year following the year I turn 70.5, which means the first RMD would be due in 2021. If I wait until April 1 of 2021 to take the initial RMD, do I also need to take a second RMD by 12/31/2021?

Thanks.
You are 70 in 2019. You are 70.5 in 2020. You can take your first RMD (the one for based on your balance on December 31, 2019) as late as April 1, 2021. You must take your second RMD (the one based on your balance on December 31, 2020) by December 31, 2021.

If you do not take the first RMD until 2021, you have two in the same tax year. You can spread the first RMD across the two years if you want; you could take part in 2020 and the rest in 2021.

This requires good tax planning. 2020 might be your final year of employment, and your income will be much lower in 2021. You may be getting married in 2021 and be Single one year, MFJ the next. The default recommendation, not knowing any special circumstances, is to take one each year.

Note that not taking an RMD in 2020 will make the December 31, 2020 balance in your account higher than if you take it. This has the effect of increasing the required distribution in 2021.

Re: RMD timing question

Posted: Tue May 14, 2019 2:09 pm
by Alan S.
If you decide to defer your first year RMD, it does not have to be all or nothing. You can defer part of your first year RMD. Depending on your other taxable income in each of those first two years, you can plan how best to control your taxes. Due to the formula for determining the amount of SS income that is taxable, equal taxable income in each year does not necessarily produce the lowest tax bill in all cases.

Re: RMD timing question

Posted: Tue May 14, 2019 4:05 pm
by celia
If you delay your first RMD, the second one will be more than you normally would have to pay since the second RMD is based on the previous year ending account value including the first RMD that has not yet been taken out plus the growth on the first RMD.