A respected financial advisor for the nonprofit Society of Financial Awareness, Robert M. Ryerson educates professionals and the public on long-term financial and retirement planning strategies. Robert M. Ryerson’s knowledgeable take on tax strategy has been published in several notable media outlets. He previously wrote an article on required minimum distributions for Forbes.
The IRS requires account holders of tax-deferred pension plans such as 401(k)s and individual retirement accounts to begin withdrawing a baseline amount after turning 70 and a half. Known as a required minimum distribution (RMD), this amount is calculated using a formula that considers the account balance and the retiree’s age.
While many of the IRS regulations governing RMDs for 401(k)s and IRAs are similar, there are some notable differences. For example, the RMD for multiple IRA accounts may be withdrawn from only one account. Conversely, a retiree with multiple 401(k) accounts must calculate each RMD separately and make the appropriate withdrawals from each account.
Additionally, if the account holder remains employed, he or she is not required to take an RMD from any 401(k)s associated with a current employer. This does not apply to IRAs. However, retirees can make tax-free charitable contributions for up to $100,000 from an IRA annually. This is not allowed with a 401(k).
The IRS requires account holders of tax-deferred pension plans such as 401(k)s and individual retirement accounts to begin withdrawing a baseline amount after turning 70 and a half. Known as a required minimum distribution (RMD), this amount is calculated using a formula that considers the account balance and the retiree’s age.
While many of the IRS regulations governing RMDs for 401(k)s and IRAs are similar, there are some notable differences. For example, the RMD for multiple IRA accounts may be withdrawn from only one account. Conversely, a retiree with multiple 401(k) accounts must calculate each RMD separately and make the appropriate withdrawals from each account.
Additionally, if the account holder remains employed, he or she is not required to take an RMD from any 401(k)s associated with a current employer. This does not apply to IRAs. However, retirees can make tax-free charitable contributions for up to $100,000 from an IRA annually. This is not allowed with a 401(k).