Clarifying Waivers of RMDs for 2009

Retirement plan account participants, IRA owners, and their beneficiaries do not have to take their required minimum distributions (RMDs) attributable to 2009.   Congress waived those RMDs for 2009 so that distributions would not have to be taken while the stock markets—and, correspondingly, plan values—were at a low, in hopes that the markets would recover quickly.

Beneficiaries taking retirement plan distributions over a five-year period can also waive the distribution for 2009, effectively permitting the beneficiary to take distributions over a six-year period.

However, this special one-year relief from taking RMDs does not apply to 2008 RMDs that were deferred until 2009, since those are actually delayed 2008 distributions; therefore, they are not included in the waiver relief for 2009 distributions.

Does this mean that you cannot or should not take a distribution in 2009? Not necessarily; you can still take a distribution if you need or want to. Even if you do not need to take a distribution, it may be appropriate for you to take one based on your income and deductions for the year. If your taxable income is negative, you can take a distribution equal to the negative amount free of any taxes. If you are in an abnormally low-income year, you may also wish to take a distribution and take advantage of a lower-than-normal tax rate.

If you don’t know how to proceed and need some guidance, please call this office for an appointment.

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