pyriel
04-28-2005, 06:09 AM
RBD stands for Required Beginning Date. RMD stands for Required Minimum Distribution. The RBD for IRA holders is the April 1 following the year they turn 70 ½. Now, why should we be concerned about these two acronyms. The reason why we have to be concerned is because RBD is the time that IRA holder must start (if they haven’t done so already) taking out aan RMD. OK, I know that I am already losing a lot of people so I am going to give an example: TSPTom will turn 70 ½ tomorrow 4/28/05. He has until 1 April 06 to start taking out an RMD. This means that if he hasn’t been withdrawing anything in his IRA since he became eligible at age 59 ½ years old, IRS is now mandating him to do so or else he will get hit with a 50% punishment tax. Ouch! If TSPTom’s RMD is $50K for 2006 (last day to withdraw his RMD is 31 December 2006) IRS will take away $25K if withdrawn after 31 December 2006.
Now some people are wondering why would anyone decide not to take any distribution once they become eligible at age 59 ½? Easy. It could be that they have other retirement accounts they are tapping into and they are planning on leaving their IRA to their loved ones (sounds like me).
In 2003, banks, brokers, insurance companies, mutual fund companies and other financial institutions holding your IRA are required to alert you to make an RMD. In 2004, these institutions were also told that they must report you to the IRS when they remind you (talk about tattle tell).
So, for those who are planning to have lots of money before they turn 70 ½ years old and have no plans to touch their IRA, please remember this post about RBD and RMD.
Just my 02.
Pyriel
PS… This RBD and RMD does not have any bearing with ROTH IRA. Why? Because ROTH IRA was invested with post tax dollars and distributions are not subject to taxation. This is why some people plans to transfer their TSP to Traditional IRA and later transfer them to ROTH IRA.
Now some people are wondering why would anyone decide not to take any distribution once they become eligible at age 59 ½? Easy. It could be that they have other retirement accounts they are tapping into and they are planning on leaving their IRA to their loved ones (sounds like me).
In 2003, banks, brokers, insurance companies, mutual fund companies and other financial institutions holding your IRA are required to alert you to make an RMD. In 2004, these institutions were also told that they must report you to the IRS when they remind you (talk about tattle tell).
So, for those who are planning to have lots of money before they turn 70 ½ years old and have no plans to touch their IRA, please remember this post about RBD and RMD.
Just my 02.
Pyriel
PS… This RBD and RMD does not have any bearing with ROTH IRA. Why? Because ROTH IRA was invested with post tax dollars and distributions are not subject to taxation. This is why some people plans to transfer their TSP to Traditional IRA and later transfer them to ROTH IRA.