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Reminder: For Clients Turning 70½
Are you required to take a required minimum distribution (RMD) by December 31? If you or a family member are age 70½ or older and are invested in an applicable IRA or retirement account, the answer is yes.1 Missing the deadline has consequences as you are subject to a 50% penalty tax on your withdrawal amount.
Generally, at age 70½, you must begin making annual withdrawals from most IRAs and employer-sponsored retirement plans, such as a 401(k).2 Applicable IRA types include traditional, Rollover, SEP, SARSEP and SIMPLE IRAs. If you have a Roth IRA, you do not need to take an RMD at any age.
Read on to learn about the IRS guidelines for these withdrawals.
Depending on your account type, you can log in to take your RMD or use one of the forms below. Need to know how much? Calculate your RMD using our calculator.
Log in to take your RMD
Generally, RMDs are taken proportionately from all IRAs on file. However, if you prefer, you may request that we take your distribution from a specific account.
Note: Consolidating your IRAs can make tracking your RMDs easier. Learn more .
You must begin taking annual RMDs when you reach age 70½. You must take your first annual minimum distribution no later than April 1 of the year after you reach age 70½.2 If you take your first distribution between January 1 and April 1 of that year, you must take your next distribution on or before December 31 of the same year. For each year that follows, you must take your minimum distribution on or before December 31.
Generally, you will owe ordinary income taxes on your distribution in the year you receive it. If you made non-deductible contributions to your IRA, a portion of your distribution will be tax free.
Your required minimum distribution generally is based on your life expectancy, beginning in the year you attain age 70. Find your age on the "Distribution Periods" table from the IRS below to determine the number of years to use in your calculation.
However, if your spouse is the sole beneficiary of your IRA and is more than 10 years younger than you, the IRS allows you to use the joint life expectancy of you and your spouse. This calculation, which uses a different IRS table, will result in lower required minimum distributions. Call an American Century Investment Consultant or your tax advisor for help with this calculation.
Source: Internal Revenue Service
This hypothetical information is for illustrative purposes only and not intended to represent any particular investment product.
Just because you've reached 70½ doesn't mean you can't keep your money working for you. If you'd like to keep your RMD money invested, you can exchange it into a taxable account. We offer more than 80 no-load funds, including asset allocation portfolios. Review our funds or call us to discuss your goals and we can help you determine the right funds for your situation.
Required minimum distributions from your IRA after your death are based on who you name as beneficiary, your date of death and your age on that date:
Beneficiaries must be on file before or as of the date of death. For purposes of calculating the required minimum distributions, the designated beneficiary is determined on September 30 of the year following your death.
Visit the IRS website for more information about required minimum distributions.
1 If you have recently reached age 70½, be sure to read the section When to Take Distributions.
2 If you are a 403(b), governmental 457(b) or a qualified plan participant who is not a 5% owner, your required beginning date is generally April 1 of the year you reach 70½ or after you retire, whichever is later. Check with your employer to determine when you are required to take a distribution from your plan.
IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.