Rollover RMD ?

[Delawaredave5]

Mom is 72 and required to take RMD from her IRA. She received below email the other day from Vanguard.

What does it mean ?

I'm assuming she still must take RMD - but if she already withdrew enough earlier in the year, you can rollover an automatic RMD distribution back into an IRA account ?

"[FONT=Arial, Helvetica, sans-serif]By now, you may have heard about legislation passed in 2008 that lets you choose to take your 2009 required minimum distribution (RMD), take a partial distribution, or suspend your 2009 RMD entirely. These options apply to traditional, SEP-, SIMPLE, and rollover IRAs, as well as 401(k)s, 403(b)s, defined contribution plans, and inherited IRAs and inherited retirement plan accounts that are subject to RMDs."[/FONT]

 

[ziggy29]

This is actually a VERY timely topic.

If she has not yet taken the RMD, she doesn't have to take it in 2009.

Normally when someone takes a withdrawal, they have 60 days to reverse it and return it to the IRA -- and normally if the withdrawal was more than 60 days ago, it's too late to reverse the distribution. But for 2009 only, that deadline to reverse a distribution has been extended to either 60 days or November 30, 2009 -- whichever is later. So for 2009 only, even if someone took an RMD for 2009 earlier in the year and only now is realizing they didn't have to take it -- they had better hurry and reverse the distribution before the end of this month.

See IRS Notice 2009-82 for more details. Anyone who has taken an RMD for 2009 and later realized they didn't have to take it has until November 30 to reverse the distribution and avoid the tax hit, provided they haven't already reversed a distribution in 2009.

http://www.irs.gov/pub/irs-drop/n-09-82.pdf

 

[Delawaredave5]

Thanks. So the requirements of taking an RMD have not changed - nor has the amount - right ?

Above applies only if a person distributed out more than they required - in this case, they can "put some back".

The calculators say my mom needs to take out at least $5,000 - she hasn't taken out any this year - so I still need to do her RMD.

 

[ziggy29]

The calculators say my mom needs to take out at least $5,000 - she hasn't taken out any this year - so I still need to do her RMD.

She does not need to take an RMD for 2009 at all. IF she had done so already, she would have had 60 days or until November 30 to roll it back into the IRA to avoid taxes.

But if she hasn't taken it yet and she doesn't need the money and wants to put off the taxes, just don't take one this year.

 

[Delawaredave5]

Thanks ! I missed this - just found below elsewhere on web.

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From Vanguard:

December 23, 2008

Breaking news on RMDs

If you're over age 70½, you won't have to take required minimum distributions (RMDs) in 2009 from your tax-deferred retirement accounts under new legislation signed by President Bush.

The law is intended to help seniors conserve their retirement resources in the wake of the recent stock market downturn.

Normally, investors over age 70½ are required to take an annual withdrawal from their retirement accounts (based on their life expectancy and prior year's account balance) or pay a 50% penalty on the amount they should have withdrawn.

Supporters of the legislation said it's unfair to require retirees to withdraw funds from retirement accounts depleted by the stock market selloff. Suspending 2009 RMDs will presumably leave more money in investors' retirement accounts, where it will have the potential to continue growing tax-free until withdrawal.

The 2009 RMD suspension applies to traditional IRAs, 401(k)s, 403(b)s, and other defined contribution plans. The suspension also applies to investors under age 70½ with inherited IRAs or inherited retirement plan accounts that would otherwise be subject to RMDs.
What about 2008 RMDs?

The new law doesn't suspend RMDs taken for 2008.

If you were over age 70½ for all of 2008 and you haven't requested your 2008 RMD on savings held at Vanguard, you have until Wednesday, December 31, though we suggest doing so sooner, if possible. If you turned 70½ during 2008, you have until April 1, 2009 to request your distribution for 2008.

You can get an estimate of your 2008 RMD on Vanguard.com. You can request your distribution from Vanguard online, by phone, or by mail. If you're planning to request a distribution by mail, we strongly recommend doing so at least a week ahead of time in order to meet the deadline.