A big rule change for IRAs

January 22, 3:55 PMBaltimore Financial ExaminerTom Taylor, CPA/PFS

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The Worker, Retiree, and Employer Recovery Act of 2008 waives any required minimum distribution (RMD) for 2009 from retirement plans that hold participant benefits in an individual account, such as 401k plans and 403b plans and IRAs.  There is no such waiver for 2008 RMDs.

By the way, how many of you know that IRA is the acronym for Individual Retirement Arrangement and not Individual Retirement Account as common US vernacular insists.

The IRS has published a Special Edition - January 2009 version of its Employee Plans Newsletter.  If you're not sure if you need to take an RMD for 2009, print out the newsletter and include it with your tax papers to make sure you discuss it with your CPA.

General guidelines for taking an RMD from an IRA...

An account owner must take the first RMD for the year in which he or she turns 70 ½. However, the first RMD payment can be delayed until April 1st of the year following the year in which he or she turns 70 ½. For all subsequent years, including the year in which the first RMD was paid by April 1st, the account owner must take the RMD by December 31st of the year.

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Tom Taylor, CPA is a fee-only Financial Planner and Certified Public Accountant and can be contacted at Thoma Capital Management in Towson, MD.  He is a member of NAPFA and the MACPA.