When are 403b withdrawals required?

[Frustrated]

I have a small 403b, but it pays 4.5% interest, so I figure I should leave it alone for as long as possible.

As I read it, i hae to start withdrawals the year following my 70.5 birthday. Is that correct?

But how much? Most things I found just said the required amount, but weren't specific. That one I found that was said approximately 7% a year. Does that sound right?

thanks

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[Arthur Rubin]

On Saturday, July 8, 2017 at 8:52:07 PM UTC-7, Frustrated wrote:
> I have a small 403b, but it pays 4.5% interest, so I figure I should leave it alone for as long as possible.
>
> As I read it, i hae to start withdrawals the year following my 70.5 birthday. Is that correct?

More or less. You have to calculate withdrawals starting the year you reach 70.5, but the first withdrawal can be deferred until April 1. None of this applies if you are still working for the non-profit.

>
> But how much? Most things I found just said the required amount, but weren't specific. That one I found that was said approximately 7% a year. Does that sound right?

You use Table III in Publication 590B, based on your birthday during the year. The divisor ranges from 27.4 years at age 70 to 1.9 years at ages over 115.

--
Arthur Rubin, CRTP, AFSP
Brea, CA

[Frustrated]

On Sunday, July 9, 2017 at 1:23:01 AM UTC-4, Arthur Rubin wrote:
> On Saturday, July 8, 2017 at 8:52:07 PM UTC-7, Frustrated wrote:
> > I have a small 403b, but it pays 4.5% interest, so I figure I should leave it alone for as long as possible.
> >
> > As I read it, i hae to start withdrawals the year following my 70.5 birthday. Is that correct?
>
> More or less. You have to calculate withdrawals starting the year you reach 70.5, but the first withdrawal can be deferred until April 1. None of this applies if you are still working for the non-profit.
> >
> > But how much? Most things I found just said the required amount, but weren't specific. That one I found that was said approximately 7% a year. Does that sound right?
>
> You use Table III in Publication 590B, based on your birthday during the year. The divisor ranges from 27.4 years at age 70 to 1.9 years at ages over 115.
>
> --
> Arthur Rubin, CRTP, AFSP
> Brea, CA
>
> --

That is simple enough; thanks.

There is no maximum; I could just empty it when I hit 70.5 rather than mess with the paperwork?

[John Levine]

In article <290d864d-7f05-4d42...@googlegroups.com>,

Frustrated <wa...@lippman.info> wrote:
>There is no maximum; I could just empty it when I hit 70.5 rather than mess with the paperwork?

Yes, keeping in mind of course that it might bump you into a higher tax bracket that year.

[bh2...@gmail.com]

On Saturday, July 8, 2017 at 11:52:07 PM UTC-4, Frustrated wrote:
> I have a small 403b, but it pays 4.5% interest, so I figure I should leave it alone for as long as possible.
>
> As I read it, i hae to start withdrawals the year following my 70.5 birthday. Is that correct?
>
> But how much? Most things I found just said the required amount, but weren't specific. That one I found that was said approximately 7% a year. Does that sound right?
>
> thanks

Your 403b custodian will tell you what dollar amount is required. Remember, the distribution has an affect on the tax on your total social security received. Also, if you wait until the following year for the withdrawal you will take 2 withdrawals out for this year and next.

[lotax]

April 1, 2017, and April 1, 2018, are both on a weekend. Does that move the date by which I have to pay a required minimum distribution from my retirement account to that next Monday?

[Alan]

On 7/31/17 6:49 AM, lotax wrote:
> April 1, 2017, and April 1, 2018, are both on a weekend. Does that move the date by which I have to pay a required minimum distribution from my retirement account to that next Monday?
>

The date is April 1. It does not matter what day of the week it falls on.

[Retired]

On 7/31/17 9:49 AM, lotax wrote:
> April 1, 2017, and April 1, 2018, are both on a weekend. Does that move the date by which I have to pay a required minimum distribution from my retirement account to that next Monday?
>

Some reading here will help:
https://www.irs.gov/uac/newsroom/irs-reminds-taxpayers-of-april-1-deadline-to-take-required-retirement-plan-distributions

Also, assuming April 2017 would be your 1st RMD, then your 2nd, and
all future RMDs are due by Dec 31 of each year. So if you wait to do
the 1st in April 2017, and then 2nd in Dec 2017, you will have to
report both RMDs in the same tax year for 2017.

It may not save you anything to wait til April for 1st RMD.

As always, YMMV

[ira smilovitz]

On Tuesday, August 8, 2017 at 11:43:58 AM UTC-4, lotax wrote:
> On Monday, July 31, 2017 at 9:52:37 AM UTC-4, lotax wrote:
> > April 1, 2017, and April 1, 2018, are both on a weekend. Does that move the date by which a retiree would to receive his first required minimum distribution from his retirement account to the next Monday?
>
> --

No. That is an absolute deadline.

Ira Smilovitz, EA

[lotax]

Does anybody know why the IRS rule about weekends and legal holidays doesn't apply here?
What that rule says is "When the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday, or a legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday."
I'm not *really* worried about this. It's more my sense of curiosity, and not my income tax compliance that's asking the question.

[ira smilovitz]

On Wednesday, August 9, 2017 at 6:34:19 PM UTC-4, lotax wrote:
> Does anybody know why the IRS rule about weekends and legal holidays doesn't apply here?
> What that rule says is "When the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday, or a legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday."
> I'm not *really* worried about this. It's more my sense of curiosity, and not my income tax compliance that's asking the question.
>
> --

The rules regarding the timing of distributions are not rules "prescribed under authority of the internal revenue laws" (Title 26 of the US Code), they are rules prescribed under the labor laws (ERISA, part of Title 29 of the US Code).

Ira Smilovitz, EA

[lotax]

> The rules regarding the timing of distributions are not rules "prescribed under authority of the internal revenue laws" (Title 26 of the US Code), they are rules prescribed under the labor laws (ERISA, part of Title 29 of the US Code).
>
> Ira Smilovitz, EA
>

Here's what Title 26 - the Internal Revenue Code - says, at IRC § 401(a)(9)(C):

"(C)Required beginning date.—For purposes of this paragraph—
(i)In general.—The term “required beginning date” means April 1 of the calendar year following the later of—
(I) the calendar year in which the employee attains age 70½, or
(II) the calendar year in which the employee retires."

That sure looks like it's "the internal revenue laws" to me...

[ira smilovitz]

On Thursday, August 10, 2017 at 3:01:43 PM UTC-4, lotax wrote:
> > The rules regarding the timing of distributions are not rules "prescribed under authority of the internal revenue laws" (Title 26 of the US Code), they are rules prescribed under the labor laws (ERISA, part of Title 29 of the US Code).
> >
> > Ira Smilovitz, EA
> >
>
> Here's what Title 26 - the Internal Revenue Code - says, at IRC § 401(a)(9)(C):
>
> "(C)Required beginning date.—For purposes of this paragraph—
> (i)In general.—The term “required beginning date” means April 1 of the calendar year following the later of—
> (I) the calendar year in which the employee attains age 70½, or
> (II) the calendar year in which the employee retires."
>
> That sure looks like it's "the internal revenue laws" to me...
>
> --

Just because something appears in one part of the US Code doesn't mean its source is that part of the code. Most pension/retirement law is sourced to Title 29. This overlap between Labor (Title 29) and Taxation (Title 26) has led to some interesting Court decisions which allow certain retirement account investments/transactions (usually found in self-directed IRAs) which the IRS claims violate the tax law.

This is an area that requires accurate legal parsing to understand. (FWIW, I'm not an attorney.)

Ira Smilovitz, EA

[Alan]

On 8/10/17 7:48 AM, ira smilovitz wrote:
[snip]

> The rules regarding the timing of distributions are not rules "prescribed under authority of the internal revenue laws" (Title 26 of the US Code), they are rules prescribed under the labor laws (ERISA, part of Title 29 of the US Code).
>
> Ira Smilovitz, EA
>

I take exception to this statement as it relates to the OP query. ERISA
(Chapter 18 of Title 29) contains the minimum standards for retirement
plans and also contains protections for the participants. For example,
it contains a rule for when a plan must allow a participant to withdraw
benefits. It does not contain any rule relating to a mandatory beginning
date for distributions. That rule can only be found in Sec. 401(a)(9)
of Title 26, Subtitle A - Income Taxes. Any company that offers a
retirement plan to its employees must conform to the rules of Title 29
and they must conform to the rules found in Title 26, Subtitle A,
Chapter 1, Subchapter D. This is Sections 401 thru 436. The two titles
may have some overlaps. However, the required beginning date is not one
of them.