IRARequired Minimum Distributionsretirement plansRMD

Required Minimum Distributions (RMDs) from IRAs Suspended

As part of the Worker, Retiree, and Employers Recovery Act of 2008, Congress recently approved a one-year suspension of the required minimum distributions (RMDs) for 2009 for taxpayers who are age 70 1/2 or older. Requirements for RMDs for 2008 remain the same.

If you are unfamiliar with what RMD’s are, they are basically the amount that tax law requires that you distribute from your IRA, SEP-IRA and SIMPLE IRA account(s) each year once you reach age 70 1/2. The amounts of the required minimum distribution is generally calculated based on a life-expectancy divisor (if it is your personal account.) This divisor is figured against the previous year’s ending balance of the IRA.

Congress supposedly took this measure because everyone’s account values are so low right now. Unfortunately, for the relief to provide any real bang for retiree’s, they should have made it apply to 2008 as well – since the RMD for 2008 is based on the year end 2007 balance.