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Your Bank > Education and Advice > CNB University

What are Required Minimum Distributions and How Are They Calculated?

M Mazzochetti 2014
Mark S. Mazzochetti, CISP is Vice President - Retirement Services Officer and can be reached at MMazzochetti@CNBank.com or (585) 419-0670 x50606.

Required minimum distributions are the amounts that you must withdraw each year from your traditional IRA, employer-sponsored retirement plan, or tax-sheltered annuity. (Lifetime minimum distributions are not required from Roth IRAs, but your beneficiaries generally must begin taking distributions following your death.) You must begin to take the annual distributions by April 1 of the year following the year in which you reach age 70½. This is known as your required beginning date. If you work for your employer past age 70½ and are still participating in the employer's retirement plan, you may postpone your first distribution from that plan until April 1 of the year following the year of your retirement (as long as you are not more than a 5 percent owner of the employer).

Regardless of your required beginning date, you must take subsequent distributions by December 31 of each calendar year. You'll continue to take the annual distributions each year until your death or until your account balance is reduced to zero. You can always withdraw more than the required minimum amount in any given year. However, if you withdraw less, you will be subject to a 50 percent federal penalty on the difference between the amount you should have taken and what you actually took.

The basic calculation for individual accounts provides that the required minimum distribution is determined by dividing the account balance by the distribution period. For lifetime required minimum distributions, there is a uniform distribution period for almost all individuals of the same age. The uniform lifetime distribution period table is based on the joint life and last survivor life expectancy of you and a hypothetical beneficiary 10 years younger.

However, if your sole beneficiary is your spouse and he or she is more than 10 years younger than you, a longer distribution period measured by the joint life and last survivor life expectancy of you and your spouse is permitted to be used. However, the specific rules on required minimum distribution calculations are complicated, and you should consult a tax professional regarding your situation.

How CNB Can Help

If you would like to discuss in more detail, I am available to answer any questions you may have. Please call me today at (585) 419-0670, ext. 50606 or MMazzochetti@CNBank.com.


Source: ©2016 Broadridge Investor Communication Solutions, Inc. This material provided by Mark Mazzochetti, CISP.

 

This material is provided for general information purposes only and is not a recommendation or solicitation to buy or sell any particular security, product or service. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.

Tax information presented is not to be considered as tax advice and cannot be used for the purpose of avoiding tax penalties. Canandaigua National Bank & Trust does not provide tax, legal, or accounting advice. Please consult your personal tax advisor, attorney, or accountant for advice on these matters.