Dear Liz: When my wife reached age 59.5, we began making required minimum distributions to all of her retirement accounts.
In the process, an investment company representative stated that as long as she was still working and contributing to her 401(k) and 403(b) at work, she did not need to take RMDs on those accounts. Ta. There have been a lot of changes recently to these types of accounts, but do they still apply or have the laws changed?
answer: No minimum distributions were required from the retirement fund at age 59 1/2. That’s the age at which people no longer have to pay a penalty to access their retirement savings, not the age at which they have to start withdrawing money.
Currently, the age to begin taking minimum distributions in retirement is 73 years old, rising to 75 years old for people born after 1960. If your wife is still working at that time, you may be able to defer taking her RMDs from her current employer-sponsored retirement plan. RMDs will still be required on other retirement accounts, such as an IRA or her 401(k) or 403(b) from a former employer. The one he-she-re-rmd exception is for Roth accounts where the account owner does not have a she-rmd.
Generally, you want to keep your funds in a tax-deferred retirement account for as long as possible. Unnecessary distributions will only increase your tax bill and potentially reduce the amount you need to live on later in life.
If the wife has already received a distribution, she can roll it over into an IRA within 60 days to avoid taxation.
Tax laws can be complex, and mistakes can be costly. Use this experience as a reason to hire a good tax professional who can answer your questions and help you avoid making potentially costly mistakes again.
Liz Weston is a certified financial planner and personal finance columnist in the United States. Nerd wallet. Questions can be directed to 3940 Laurel Canyon, No. 238, Studio City, CA 91604 or by using the “Contact” form below. askrizweston.com.