When do I need to take an RMD?

One of our clients asked us this question last week and we thought you might be interested to hear the answer.

First of all, what is an RMD?

It is a required minimum distribution.

When do you need to take one? My December 2006 statement shows that I have an RMD due on April 1, 2007, and another December 31, 2007. How could I have two RMDs due in one year?

You are first required to take an RMD by April 1 in the year after you turn 70-1/2. Afterward, you are required to take future RMDs by December 31 of each calendar year. Essentially, you have an additional 3-month “grace period” (January 1-March 31) to take your first RMD.

Why do you need to take an RMD?

Basically, paying taxes is inevitable when it comes to your retirement assets. You can defer paying some income taxes by refraining from distributing your retirement assets, but you can't do this forever.

Information was taken from Charles Schwab and Investopedia. Visit these sites to learn more.