I have a number of clients turning 70.5 yrs. old this year. That means they have to start taking their RMD’s (required minimum distribution) form their qualified retirement accounts. I am often asked if all of the funds need to come from one account, how do they take the distribution and how does the IRS know that it is the RMD?
First, there is a formula for how much has to be withdrawn. In the first year you must withdraw 3.65% of your 12/31/15 balances.
Second, it does not matter which accounts you withdraw from as long as the amount is correct.
Third, it does not matter if you take your RMD monthly, quarterly, or in a lump sum, just make sure you take enough out.
Another note: in the year that you turn 70.5, you don’t have to take your first RMD until April 1st of the following year. If you defer your first RMD, you will have to take two withdrawals that year.
If you do not need your RMD to supplement your lifestyle, you may just want to move funds from your qualified account directly to your general investment account and let the funds continue to work for you.