January Study Question

ANSWER POSTED Continue reading

With regard to Required Minimum Distributions (RMDs), which of the following is true?

  1. An account owner may not withdraw more than the RMD.
  2. RMDs can be rolled over to a new tax-deferred account.
  3. RMD rules apply to all employer-sponsored retirement plans including 401(k) and 403(b) plans.
  4. RMD rules do not apply to Roth 401(k) accounts.

Answer: 3. RMD rules apply to all employer-sponsored retirement plans including 401(k) and 403(b) plans.

Explanation: RMD is determined by the account-holder’s life-expectancy and the age of their beneficiary. The RMD must be drawn from qualified retirement accounts by April 1st of the year following the account holder’s 72nd birthday, unless the account holder turned 70 1/2 in 2019 or earlier, in which case RMDs must start when the account-holder is 70 and 1/2. RMD rules apply to all employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs. The RMD rules also apply to Roth 401(k) accounts, which are a hybrid of the Roth IRA and the traditional 401(k) plan. However, the RMD rules do not apply to Roth IRAs while the owner is alive. An account owner may withdraw more than the RMD, the “M“ stands for minimum not maximum. However, RMDs may not be rolled over to a new tax-deferred account.

Congratulations Kevin, this month’s Study Question of the Month winner!

3 thoughts on “January Study Question”

Leave a Reply

Your email address will not be published. Required fields are marked *