2009 Required Minimum Distributions Suspended

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2009 Required Minimum Distributions Suspended

Required Minimum Distributions (RMDs) from Individual Retirement Accounts have been suspended for 2009. This rule change has a variety of complexities, and the implications for each client vary. Suffice to say, we will be discussing this issue and how it applies to you when we meet later this year.

To put it briefly, the RMD for 2009 can be considered “zero” for your IRAs, 401(k)s, 430(b)s, and 457 plans, but not your defined benefit plans or traditional pension plans. This change applies to account owners and account beneficiaries.

You can take a distribution from your IRA in 2009, if you choose; it will be taxable income. If you turned 70.5 years old in 2008, you are required to take your 2008 RMD in 2009. If you will turn 70.5 in 2009, you can skip your first RMD in 2009, but you will be required to take an RMD by the end of 2010.

For those who withheld federal and/or state taxes from an IRA distribution and choose not to take an IRA distribution in 2009, you may need to make estimated withholding payments throughout the year. Please contact your tax preparer.

For those who have inherited an IRA and are making a complete distribution using the five-year rule, you have an extra year, as 2009 will not count as one of those five years.

Please call us if you have questions.