Required Minimum Distributions (RMDs) for Self-Directed Accounts

In this video, John Bowens will discuss required minimum distributions (RMDs) as they relate to holding illiquid investments in your self-directed IRA or other tax-deferred savings account. He will cover topics such as how to calculate your RMD, at what age you need to start taking RMDs, and what types of accounts you have to consider.

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RMD means that on an annual basis, once we turn a certain age, we have to start distributing money from our tax-deferred savings accounts.

Starting in January 2020, we have to start taking RMDs at 72 years of age.

RMDs have to be taken from tax-deferred accounts such as a Traditional or Rollover IRA, SEP IRA, SIMPLE IRA, 401(k), etc.

RMDs usually do not have to be taken from tax-free accounts like Roth IRAs and Roth 401(k)s. Some Roth 401(k)s do have RMDs, but many investors roll their Roth 401(k) into a Roth IRA to avoid RMDs.

For non-spousal inherited IRAs of any kind, there are no RMDs however, everything must be withdrawn from the inherited account within 10 years (with certain exceptions for those under the age of 18).

To calculate your RMD, visit IRS.gov and check out publication 590B.m In the section covering RMDs, there will be a link for figuring the owner's RMD. You can use the Uniform Lifetime table unless your sole beneficiary spouse is over 10 years younger than you.

The distribution period is your divisor. You will take the total of all your tax-deferred accounts and divide it by the distribution period for your age. Calculate RMD for all of your tax-deferred accounts combined so that you can satisfy all of your RMDs using whatever liquid assets you have in any of your tax-deferred accounts.

As you age, you will be required to take a larger portion of your balance as your RMD.

Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.