How Early Can I Take My First Rmd

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

This QOTW has been updated to reverberate changes fabricated by the SECURE Human activity, which was signed into law on December 20, 2019.

Participants who were built-in on or before July 1, 1949, are required to start taking their RMDs in the year they turn lxx ½.  Those born after that appointment are subject area to RMDs on reaching age 72.

Facts

One of the non-owner participants in our 401(k) plan volition be turning 72 in April of 2021.  The participant knows her start RMD is due no later than Apr 1, 2022, but she has asked whether she has to wait that long to actually withdraw the money.

Question

Could she take her first RMD in 2020?  What about old in 2022 but before she turns 72?

Answer

Earlier answering your question, let's quickly review the general timing for required minimum distributions.  The deadlines vary based on whether or non a participant owns more than 5% of company sponsoring the plan.

• 5% Owner | These participants are required to have their showtime RMD no afterwards than April 1^st of the year post-obit the year in which they attain age 72.  This is true whether they are retired or continuing to work.  Subsequent RMDs must be taken past each December 31^st, thereafter.
• Non-owner | The rule for non-owners is similar except that they can cull to wait until April 1^st of the year following the subsequently of the year they reach age 72 or the twelvemonth they really retire earlier taking their kickoff RMD.  Once more, each subsequent distribution is required by Dec 31^st of each year.

Now back to your question.  Assuming she is retired, your participant will be happy to hear she doesn't take to expect until April 1, 2022 to take her starting time RMD, but she too cannot accept it during 2020.  To exist eligible to take an RMD, a participant must await until his or her initial "Distribution Calendar Yr." This is defined every bit the yr in which the participant turns age 72.  Connecting the dots, your participant could take her distribution at any betoken during 2022 to satisfy the RMD.

At that place are a couple other considerations to keep in heed.

• The participant must satisfy the RMD rules separately with respect to each company-sponsored plan where she has a residuum, but all IRAs tin can exist aggregated and the RMD satisfied by taking a sufficient amount from any one of them. As a result, information technology might brand more sense (logistically and in terms of fees) for her to rollover her entire balance from your plan in to an IRA and take RMDs from at that place.
• With that said, RMDs are not eligible to be rolled over. That means she would accept to complete the rollover in 2022 to avoid an RMD from your programme. If she waits until 2021, she would beginning have to have the RMD from the plan and then rollover the remainder into her IRA.
• If the participant is still employed, she would not be entitled to take an RMD until she retires. Nevertheless, if your plan permits in-service distributions, she could admission her business relationship that manner.  It might seem like a deviation without a distinction, but an in-service distribution is subject field to different federal tax withholding requirements than RMDs and can likewise be rolled over.

In that location are a lot of nuances to the RMD rules, and then information technology's always a skillful thought to double-check if you are unsure how to proceed…simply similar you did here.For more than data on required minimum distributions and plan distributions in general, please visit our Cognition Eye here , hither 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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