25 Sep Required Minimum Distributions
What is a Required Minimum Distribution?
A required minimum distribution is the amount that owners of tax-deferred retirement accounts must begin withdrawing from their accounts by April 1 following the year they reach age 70 ½ .
RMD rules apply to tax-deferred retirement accounts including:
- Traditional IRAs
- Rollover IRAs
- SIMPLE IRAs
- SEP IRAs
- Most small business accounts (Keoghs)
- Most 401(k), 403(b) and 457(b) plans
Roth IRAs are not subject to RMDs.
Do I have to take a RMD if I’m still working?
Yes, you will still be required to take a distribution from your IRA.
In regards to an employer-sponsored retirement plan, you may qualify for an exception if you meet the following requirements:
- You’re still working and you have an employer-sponsored retirement account with the business you work for
- You do not own more than 5% of the company you work for
If you meet these criteria, you can postpone RMDs from employer-sponsored retirement accounts until April 1 of the year after you retire. Please note this exception only works for the company you currently work for and does not apply to other retirement accounts you may have with companies you no longer work for.
How do I know how much to take?
MyRoboAdviser™ has partnered with Betterment to provide technology and custodial support for MyRoboAdviser™ clients. Betterment calculates the amount of your RMD. The amount can be seen on your tax statement at the end of January based on the balance of your MyRoboAdviser™ account.
If you have multiple accounts that require RMDs:
If you have multiple different tax-deferred retirement accounts you may be able to take your entire RMD from a single account, depending on the account type.
- Traditional IRAs, SEP IRAs, Rollover IRAs, and SIMPLE IRAs: You must calculate your RMD for each account individually but you are allowed to withdraw the total RMD amount from any of the accounts.
- 403(b) plans: You must calculate your RMD for each account individually but you are allowed to withdraw the total RMD amount from any of your 403(b) accounts.
- 401(k) & 457(b) plans: You must calculate your RMD for each account separately and take distributions individually.
MyRoboAdviser™ does not currently advise 403(b) plans, 401(k) plans, 457(b) plans, SIMPLE IRAs and there are restrictions to SEP IRAs.
Any distribution from an account that require a RMD will count toward that year’s RMD. Amounts taken in excess of your RMD in a year do not count toward future RMDs.
Deadline for taking an RMD and penalty for missing it?
After you take your first RMD, your deadline for taking it is December 31 each year.
The penalty for missing a RMD is 50% of the RMD that was not taken. Plus, you will have to pay income taxes based on your current tax rate on the amount withdrawn. For example, if your RMD is $10,000 for 2019 and you only take $5,000. You will pay a $50% penalty, $2,500 on the $5,000 you did not withdraw. If you miss the deadline due to a reasonable error, you may be able to request a waiver by filing IRS Form 5329.
How to take your RMD at MyRoboAdviser™:
Betterment has made it extremely simple and easy to take your RMD from your MyRoboAdviser™ account. Step one is to check how much you need to withdraw for your RMD. This can be found by clicking “documents” in the lower left of your computer screen. Then click “tax forms” on the top menu, choose form 5498. Scroll down on form 5498 until you see your “Required Minimum Distribution” amount.
Once you know how much you need to take, you simply need to click “transfer or rollover”, select the appropriate account type, you can’t take an RMD from a taxable or Roth account, and go through the steps to complete your withdrawal. Betterment will walk you through the few easy steps that are necessary to complete your RMD. Your funds should show up in 4-5 business days after you complete your RMD. Also remember that you can always take more than the RMD amount. The RMD is simply the amount you are required to take.
If you have any questions about holdings in your account or one of our models, or perhaps have another question about our services, you can contact us directly at 920.785.6012 or email us at firstname.lastname@example.org. MyRoboAdviser™ has partnered with Betterment for Advisors as our technology solution to provide our services to our clients. Betterment maintains a support line you can also call for help with navigation, linking your accounts or other site functionality. You can call the Betterment for Advisors support line at 800.400.1571.
Last updated: September 25, 2018
Disclosures: Content contained herein is presented is for informational and educational purposes only and is not intended as an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies, nor shall it be construed to be the provision of individualized investment, tax or legal advice. You should consult with your tax professional with questions related specifically to your circumstances.
My Robo Adviser is a digital investment service advised by ETF Model Solutions, LLC. Investments recommended by My Robo Adviser™ involve risk and will fluctuate in value. Unless otherwise stated, investments are not insured or guaranteed. May lose money. My Robo Adviser™ utilizes the platform and technology services of Betterment LLC, an SEC Registered Investment Adviser. Betterment provides the wrap fee program that assists us in providing our services to you. Custody and trading services for the program are provided by Betterment Securities, an SEC registered broker-dealer and member FINRA/SIPC.
My Robo Adviser’s services are specific to the investment goals that you identify. We do not provide comprehensive financial or tax planning. Our advisory services rely upon an algorithm designed and maintained by Betterment to assist us in determining our portfolio recommendations. Unless you directly consult with My Robo Adviser™ advisory personnel, the algorithm is the sole basis of the advice.
Clients and perspective clients should be aware that certain tools and content on the Betterment, LLC website, including projected returns, functionality, tax-coordinated portfolios and links to investment philosophy, research, educational materials and FAQs apply solely to Betterment’s 2-dimensional portfolios and may not apply to MyRoboAdviser.com’s 3-dimensional investment recommendations.
Existing My Robo Adviser™ clients are reminded to login and update personal information whenever their goals or personal financial circumstances change. Clients should also confirm that their current goal allocation is aligned with the recommended target allocation provided for each goal. Clients with questions regarding their account, personal financial circumstances, goals, or an investment allocation with respect to our service should contact us via email or telephone.
Prospective clients contemplating opening an account with My Robo Adviser™ are advised to read My Robo Adviser’s Form ADV Brochure, Part 2A for important disclosures about our services, business practices, the costs and risks of investing, and other important considerations prior to opening their account. You can access the most recent version of our Form ADV via a link on our website.