It’s important for clients to follow the rules in taking required minimum distributions from retirement accounts or they will face steep penalties from the IRS.
Regular distributions are generally required from retirement accounts such as IRAs and 401(k)s beginning no later than April 1 following the year the client reaches age 70-1/2 (some participants in employer-sponsored plans like 401(k)s who are still working may be able to delay required distributions until they retire assuming certain conditions). The amount changes each year and is calculated by dividing the account’s year-end value by a distribution period set by the IRS. A review of your client’s accounts can determine whether the distribution amounts are correct and whether the taxes are being calculated appropriately.
Discussing required minimum distributions with clients may also create an opportunity to review all of their retirement accounts. You may find it is a good time to discuss potential IRA rollovers or account consolidation.
Download our investor education piece, Required Minimum Distributions and your IRA, for more information.