1. Understanding Required Minimum Distributions

2. Agenda Why Required Minimum Distributions What Plans RMD Applies To
When Must RMDs Begin
Calculating RMDs
Methodology
Taxation
Penalties
Multiple Plans
RMDs After The Owner’s Death
RMD Reduction Strategies
Putting RMDs Back To Work

3. Why RMDs
One of the advantages of IRAs and other qualified plans is the benefit of tax deferral. Tax deferral makes your money grow faster. Your principal earns interest, your interest earns interest, and the money you would have paid in taxes earns interest.
As great a deal as IRAs and retirement plans are, they were never meant to be a forever tax free investment.
At some point taxes needs to be paid.
Required Minimum Distributions state when and how much must be withdrawn, to ultimately pay taxes.

4. RMD Plans The following plan must take Required Minimum Distributions
Traditional IRAs
Inherited IRAs* (Traditional, Roth)
Simplified Employee Pensions (SEP)
SIMPLE Plans
401(k)
403(b) Plans
457(b) Deferred Compensation Plans
Other Defined Contribution Plans
* In the IRA owner dies and the spouse as the beneficiary makes the IRA their own, it will no longer be considered an Inherited IRA and will follow any RMD Rules applicable to that IRA plan.

5. When Must RMDs Begin
In general, RMDs must begin by April 1 of the year following the year the IRA Owner attains age 70 ½.
If the Owner waits until that April 1 date, 2 distributions must be taken in that first year.
One distribution will represent the previous year, the other distribution will represent the current year
With 2 payments there may be a higher tax liability
Subsequent payments must be made each year by December 31
Some plans: 401(k), 403(b) or other defined contribution plans may allow the RMD to be postponed until April 1 of the year following the year the participant retires (Unless a 5% owner)

6. RMDs – 70 1/2
Example:
If the individual turns age 70 by June 30 of 2017, they must begin their RMDs by April 1 of 2018.
If the Individual turns age 70 after June 30 of 2017, they must begin their RMDs by April 1 of 2019.

7. RMD Calculating RMDs The Basic Formula for Calculating RMDs:
End-of-Year Account Value
Applicable Life Expectancy Factor
Unless…

8. RMD Tables
Uniform Lifetime Table – Assumes a life expectancy based on the owner’s age and an assumed beneficiary who is 10 years younger.
Joint and Last Survivor Table – Used if the spouse is the sole beneficiary and is more than 10 years younger than the owner.
Notes:
The designated beneficiary may be changed even after distributions to the owner have begun
The beneficiary has no impact on the payment unless the beneficiary is a spouse more than 10 years younger than the owner
Once the Owner has died,, the applicable factor will shift to the beneficiary’s actual life expectancy*
* See Death & Distribution Rules

9. RMD: Uniform Lifetime Table
Age
Factor 70
27.4 86
14.8 71
26.5 87
14.1 72
25.6 88
13.4 73
24.7 89
12.7 74
23.8 90 12 75
22.9 91
11.4 76 22 92
10.8 77
21.2 93
10.2 78
20.3 94
9.6 79
19.5 95
9.1 80
18.7 96
8.6 81
17.9 97
8.1 82
17.1 98
7.6 83
16.3 99
7.1 85
15.5
100
6.7

10. RMD Taxation Withdrawals will be included in taxable income
If there is an after tax balance in the account, the taxable amount will be reduced proportionately relative to the after tax portion
An owner can take out more than the required amount
If the owner takes out less than the required minimum amount, any shortfall will be assessed a 50% excise tax

11. Multiple Plans If there are multiple plans subject to RMDs:
The RMD must be calculated separately for each plan
The required minimum distribution amount can be aggregated and taken from one account:
IRAs with other IRAs
403(b)s with other 403(b) accounts with the same employer
401(k)s or other qualified plans cannot be aggregated
Inherited Traditional IRAs
Can be aggregated if from the same deceased owner
Inherited Roth IRA

12. RMDs After Death
When an account owner dies, in the year of death, the RMD would be the amount that the owner would have taken
Spouse as the sole beneficiary:
Treat the IRA as their own
Base RMDs on their current age
Base RMDs on the deceased owner’s age at death reducing the distribution period by 1 each year
Withdraw the entire account balance by the end of the 5th year following the owner’s death – if the owner died prior to the required RMD beginning date

13. RMDs After Death
Individual beneficiaries other than a spouse
Prior to beginning RMDs
Can withdraw the entire account balance by the end of the 5th year following the Owner’s death
Calculate RMDs based on the beneficiary’s age determined in the year following the year of the Owner’s death, reducing the distribution period by 1 each year.
After RMDs have begun
Calculate the RMD based on the longer of:
The beneficiary’s remaining life expectancy determined in the year following the year of the Owner’s death reduced by 1 each year
The Owner’s remaining life expectancy at death reduced by 1 each year

14. RMDs After Death For Trust Beneficiaries
May use the age of the oldest trust beneficiary for RMD calculations if the trust meets certain criteria

15. RMD Strategies Utilize for living expenses Reinvest
Consider Consolidation
Easier to manage
Opportunity to assess performance
Can match account to client’s goals and objectives
May be able to add guarantees
Consider spending down qualified dollars prior to age 70 ½
If there are tax deferred assets not subject to RMD, let them grow and use the RMD required assets to
Utilize for living expenses
Reinvest
Rebalance the overall retirement portfolio
Convert to a Roth IRA
Purchase a deferred annuity
Purchase Life Insurance or Long Term Care

16. Putting RMDs Back to Work
After RMDs have begun, if they are not needed consider:
Reinvesting in a Deferred Annuity
Consider Estate Planning
Consider Charitable Giving
Consider Legacy Planning

17. RMD Summary Plan Type Traditional IRA Traditional Inherited IRA*
Roth IRA
Inherited Roth IRA*
403(b)
401(k) or Other Qualified Plan
Roth 401(k), 457(b), 403(b)
RMD Factor
Uniform Lifetime or Joint Life and Last Survivor Expectancy Table
Single Life Expectancy Table
No RMD Required
Single Life Expectncy Table
RMD Start Date
Age 70 1/2
12/31 of the Year Following the Year of Death
None
Age 70 1/2 or Year of Retirement if Later**
Age 70 1/2 of Year of Retirement, if Later
Aggregation Allowed
Yes With IRAs Only
Yes - With other IRAs inherited from the same person
Yes - With Other Roth IRAs Inherited From the Same Person
Yes - With Other 403(b) Accounts of the Same Employer No
No - 401(k), 456(b); Yes 403(b)
*In the IRA owner dies and the spouse as the beneficiary makes the IRA their own, it will no longer be considered an Inherited IRA and will follow any RMD Rules applicable to that IRA plan. ** Special rules apply to amounts accrued in a 403(b) plan prior to 1987.