SOME PEOPLE ARE TRYING TO SIMPLIFY IT
Many people, even in Washington, realize that retirement planning can be a bit complicated at times. There are all kinds of rules about who can do what and when they have to do it and what they have to do it with. Many people have rightfully complained about how the government and bureacracy values form over substance. In an effort to address these issues the Financial Industry Regulatory Authority (FINRA) issued an investor alert on April 7, 2016 to help address some of the larger and more common questions about the law of required minimum distribution (RMD). As such, it is perhaps time to reexamine or address some of these larger issues about RMDs. It is probably best to first explain that a RMD is the legally minimum that the owner of an individual retirement account (IRA) of some sort must take out without incurring a tax penalty. An IRA can be a 401(k), 403(b) or a roth IRA or any number of other retirement investment vehicle that receives preferential tax treatment under the Internal Revenue Code (26 United States Code).
To begin with, the owners of a Roth IRA do not need to take any RMD. Once the owner passes away, his/her spouse or anyone who inherits it must then take RMDs. With respect to non-Roth IRA accounts, the latest that an IRA owner must take his/her first RMD is on April 1st on the year following that they reach 70 and one half years old. So if you reach 70 and a half on January 2, 2016 the latest you must take a distribution is on April 1, 2017.