by Mark Snodgrass on August 16, 2018

Retirement Plan Required Minimum Distributions (RMDs)


Advisors often call in with questions about how to recognize RMD's in their financial planning software. Each program calculates RMD's, with their own ways of displaying. 

In the article provided, Money Tree Software president Mark Snodgrass goes over the various RMD rules for a variety of retirement plan types and where to go in each program to see those distributions. 


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Retirement Plan Required Minimum Distributions (RMDs)

By Mark Snodgrass

Tax advantaged retirement plans can and do offer participants great income tax deferral and tax-free growth opportunities, but as they say, all good things must come to an end.

Account owners generally have to start taking withdrawals from tax deferred accounts when they reach 70½. The withdrawals have to be more than a calculated minimum amount, and the amount withdrawn is taxable income except for any parts that were taxed before (non-deferred basis) or are tax-free distributions from designated Roth accounts.

Clients will have questions about how RMDs work, advisors want to show examples of potential withdrawals, and of course everyone want to properly include the tax implications of future withdrawals as they can significantly impact plan success. Explaining and demonstrating details regarding clients’ RMDs allows advisors to inform client for eventual RMDs, so all Money Tree retirement illustrations include estimated RMDs in the planning process. 

Required minimum distribution (RMD) rules apply to IRA, SEP IRA, SARSEPs, SIMPLE IRAs, 401(k), and 403(b) retirement plans. The RMD rules also apply to Roth 401(k), Roth 403(b), and Roth 457(b) accounts. RMD rules do not apply to Roth IRAs while the owner is alive. Inherited IRAs go into different and separate RMD calculations. Roth 401K, Roth 403(b), and Roth 457(b) accounts are subject to RMD requirements, but of course required distributions from these accounts are received tax-free. To avoid RMDs on these kind of accounts and maintain maximum tax free growth, owners can roll the accounts over to Roth IRA accounts before turning 70½. 

Read the entire article here: Retirement Plan Required Minimum Distributions (RMDs)

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Mark Snodgrass

Mark Snodgrass, President of Money Tree Software, has been working with advisors to develop professional financial planning models and reports for over twenty-five years. Please address correspondence or questions regarding this article to support@moneytree.com or to Mark Snodgrass, Money Tree Software, 2430 NW Professional Dr., Corvallis, OR 97330