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71 and still working, how do I take RMD from pension plan? Tax Question for the experienced?

  • I am doing my taxes on turbo tax, it is reminding me that my husband is 71 and must be taking RMD from his IRA's and qualified pension plans. We are already taking the RMD from his IRA. He is 71 and still working, and says he will never retire, he cannot take his pension unless he retires, so I am not sure where this falls In regard to us having to take the RMD or face a 50% penalty (turbo tax says it should have been taken by dec 31) He has a large pension so half of it will be a large amount to take a chance on losing. The plan administrator where he works says "I'm no tax attorney, but I don't think we are a qualified plan". However I know a bit about taxes and I believe it is a qualified plan he is in. How does someone take a RMD from a company plan if they are not retired? An accountant I know is looking for the phone no for the IRS department that handles this, but am just wanting to get advice if anyone on here is a bored tax attorney or something. Thanks

  • Answer:

    The IRA and 401K are classified as "pensions." A traditional pension (after you retire, they pay him $XX per month and stop paying when he dies) is NOT part of the RMD logic. This is true even if there is a lump sum option.

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The 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. he RMD rules also apply to Roth 401(k) accounts. So, your husband's plan most likely is subject to RMD. However, as you can see from the quote below, RMD's are not normally required from workplace plans until the participant retires. Turbotax is probably just giving you a generic reminder based on your husband's age. Nothing in retirement tax law is that simple. FROM IRS: Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ½ years of age or, if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 70 ½, regardless of whether he or she is retired.

Lynne

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