IRA Required Minimum Distribution (RMD) FAQs
Recent changes with Required Minimum Distributions (RMD)
Our goal at Liberty Bank is to keep our customers informed of any and all recent changes to ensure that you and your investments remain Safe, Solid, and Secure. In December 2008, President Bush approved legislation that allows individuals 70 ½ or older, who are subject to the Required Minimum Distribution (RMD) rule, to suspend RMDs from their retirement plan or Individual Retirement Account for the 2009 tax year without penalty. This law is intended to provide relief to people concerned about the potential impact of ongoing financial market volatility on their retirement accounts.
To assist you with questions you may have regarding the change, below are some answers to frequently asked questions. For any additional information about your required distribution we invite you to call or visit one of our five offices. If you expect to receive a required minimum distrubution in 2009 that you would like to suspend, fill out Liberty Bank's IRA Waiver and send it to or drop it off at your nearest Liberty Bank location.
Q: |
If I waive an RMD in 2009, will I face any additional taxation or penalty when I take the distribution in subsequent years? |
A: |
No. The law allows you to defer distributions in 2009 without penalty. |
Q: |
What if I receive an RMD in 2009 that I did not want to receive? |
A: |
Individuals may return any RMDs received in 2009, provided they do so within 60 days from the date you receive the distribution. |
Q: |
Can I take a partial distribution? |
A: |
Yes, you may withdraw any funds needed. Any funds withdrawn will be reported as taxable income for 2009. |
Q: |
I depend on my RMD and do not want to waive it. What should I do? |
A: |
You do not need to take any action. Participants who receive RMDs will continue to receive them unless you notify Liberty Bank, in writing, that you would like to waive it. |
Q: |
Will waivers be available for beneficiaries (such as spouses or partners), or will they be limited to the original account holder? |
A: |
Account holders or their beneficiaries who are required to receive an RMD in 2009 may request that the payment be waived. IRA Waiver |
Q: |
Can I wait until the end of 2009 to decide whether to waive a RMD? |
A: |
It depends on when your RMD normally is sent to you. The law gives individuals 60 calendar days from the date you receive the RMD to re-contribute the distribution or roll it over to a qualified retirement account without penalty. If, for example, you received an RMD in January 2009, you would have 60 calendar days from the day you received it to return it. You would not be able to wait until after that time period to make a decision. |
Q: |
If I turned 70½ in 2008 and had planned to take my first RMD by the April 1, 2009, deadline, does the new law permit me to waive it? |
A: |
No. The law waives RMDs only for 2009. Although first-timers are allowed to delay 2008's RMD until April 1, 2009, the withdrawal still counts toward your obligation for 2008. So, if you turned 70½ last year and decided to wait until April 1, 2009 to take your first RMD, that deadline still applies. |
Q: |
What if I turn 70½ this year? |
A: |
Individuals who reach age 70½ in 2009 are not required to take a 2009 RMD. However, April 1, 2010 is still treated as the individual's required beginning date (RBD). Therefore, for 2010, the RMD for individuals who reached age 70½ in 2009 must be distributed by December 31, 2010. |
Q: |
Can I still donate money from my IRA to charity without paying income taxes first? |
A: |
Yes. In October, lawmakers resurrected a tax break available to those who make donations directly from their IRAs to charity in 2008 and 2009. Under the law, individuals age 70½ or older can donate as much as $100,000 from an IRA to a public charity. No taxes are due on the distribution, and the donation counts toward a person's RMD. |
Sources:
http://www.tiaa-cref.org/support/news/articles/gen0812_154.html
http://finance.yahoo.com/focus-retirement/article/106391/Congress-Revises-Retirement-Fund-Rules?
*Since these questions and answers were obtained from public websites and since Liberty Bank does not offer tax advice, we do not attest to the accuracy of this information. We recommend that you contact your tax advisor before taking any action.
