Minimum required distribution


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Minimum Required Distribution

The amount that an IRA must begin to distribute to an annuitant by the age of 70.5 or the age of retirement, whichever is greater. The minimum required distribution may or may not be taxable, depending on the type of IRA. The amount of the minimum required distribution is determined by the value of the IRA, the length of time the annuitant has contributed, and the amount of contributions.

Minimum required distribution (MRD).

A minimum required distribution is the smallest amount you must take each year from your retirement savings plan once you've reached the mandatory withdrawal age.

There are MRDs for 401(k) plans, 403(b) plans, and traditional IRAs, and the maximum age you can reach before they start is usually 70 1/2. If you take less than the required minimum, you owe a 50% penalty on the amount you should have taken.

You calculate your MRD by dividing your account balance at the end of your plan's fiscal year -- often December 31 -- by a distribution period based on your life expectancy. If your spouse is your beneficiary and more than ten years younger than you are, you can use a longer distribution period than you can in all other circumstances.

References in periodicals archive ?
Answer--The Roth IRA participant is permitted to change his "designated beneficiary" after age 70%, and have that change be effective for determining minimum required distributions after his death.
The minimum required distribution rules that are applicable to a traditional IRA or qualified plan account are also applicable to a Roth IRA after the owner's death.
In some cases, however, the fiduciary accounting income may exceed the minimum required distribution for the first few years, in which case Revenue Ruling 2000-2 will allow for greater deferral of income.
The proposed regulations on how to calculate the minimum required distribution for a participant in a qualified retirement plan or IRA allow much flexibility.
Alternatively, a discretionary or "accumulation" trust also provides asset protection while also allowing the trustee discretion in making minimum required distributions.
Due to the state of the economy in 2009, the provisions mandating RMDs from traditional IRAs and pension plans were suspended; it is important to keep this in mind when considering the following example involving minimum required distributions and a recharacterization.
Not only must longevity be taken into consideration, but both minimum required distributions (MRDs) and unrequired distributions (monies needed to sustain your lifestyle) are important factors.
If funds are left to accumulate after age 70V, the 50 percent excise tax on undistributed minimum required distributions must be avoided.
If funds are left to accumulate after age 70 1/2, the 50% excise tax on undistributed minimum required distributions must be avoided.
For instance, if the trust is for the benefit of a grandchild, the IRA could potentially have 40 or more years of additional tax-free compounding since the minimum required distributions are based upon the life expectancy of the beneficiary.
What's more, after age 70 1/2 you must take minimum required distributions (MRDs) from your IRA, even if you don't need the money.
This exclusion is available for taxable Roth IRA distributions as well as minimum required distributions from a traditional IRA through 2007.

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