What is a 401K Required Minimum Distribution and how do I handle it?
We're back and today we are going to talk about the Required Minimum Distribution also known as the RMD. With an RMD, you have to take out distributions on your 70 1/2 birthday OR the year that you retire. Now, the question is, "What happens if you have an RMD for a deceased person?" It's not comfortable to talk about, but it's something we definitely need to address because it's a common question.
So let's say for example, my husband passed away and he already began to take his RMD each year. So let's say he took out $20,000 in 2018. Once he's deceased, in 2019, I need to take out ONE more distribution, before I can hold on to the money. So I am required in 2019 to take the same amount that he took out the first time ($20k in this example) in order to close it out. Then that money really depends on the age of the beneficiary.
So let's say for example, I'm 59 years old. I still have some time before I'm 70 1/2 (or before I retire) to have to take that out and do distributions. So the rule of thumb is if the deceased person already took out 1 RMD or multiple, I have to take out 1 more and then the rest of the money is determined by the age of the beneficiary.
And that's it! That's the rule for 401 K Required Minimum Distributions. Make sure to check out our blog What happens if I pass away and don't change my 401K beneficiary?