Site Search

Latest News / The RMD Vacation is Over

The RMD Vacation is Over

May 1, 2021

Last year seniors were given a reprieve from the requirement to take minimum distributions from their IRAs and qualified retirement plans.  The suspension of the rules, included in the CARES Act, was enacted at a time when the stock market had moved sharply lower, and so it was intended to prevent a forced emptying of retirement funds when values were low.  Prices have since risen and the market indices have been setting records.  There is no sign of Congress renewing a suspension of the rules.

Accordingly, taxpayers who turn 72 this year must begin taking their RMDs (required minimum distributions), and older taxpayers must resume their program of drawing down tax-favored retirement funds.  The amount of the RMD is calculated based upon the age of the account owner and the total retirement account values at the close of the prior taxable year.

Normally the RMD must be received during each tax year, with failure to distribute the full amount subject to a 50% tax penalty. However, there is a grace period for the first year of RMDs, as the senior gets used to the new distribution program.  For those who turn 72 in 2021, the first RMD is not due until April 1, 2022.  That gives them an extra year of tax-deferred growth.

Caveat: The grace period is not a panacea.  Someone who delays a first RMD to 2022 will have to take two such distributions for the 2022 tax year, which could lead to higher taxes on the distributions as well as higher taxes on Social Security benefits and perhaps higher Medicare premiums.

Timing distributions

An RMD may be taken at any time during the tax year.  In a rising market, maximum tax deferral may be obtained by delaying the distribution for as along as practical. Someone who will be using the distributed funds for ordinary expenses may want to withdraw 1/12 of the RMD on the first of each month. This “averaging out” approach may be preferred when stock prices are especially volatile. 

If you have several IRAs, the RMD is determined by adding all the accounts together.  However, you do not need to take an RMD from each account.  You could take the entire distribution from the smallest account for consolidation, or you could choose to liquidate the investments with the poorest prospects to rebalance your portfolio as you take the distribution.

RMDs can be tricky, so getting professional advice is likely to be money well spent.


(April 2021)

© 2021 M.A. Co.  All rights reserved.

Previous PostNext Post


Check the background of this investment professional on FINRA’s BrokerCheck

Located at: 600 E 84th Avenue Merrillville, IN 46410
Phone: (844) 755-6600

Securities and insurance products are offered through Cetera Investment Services LLC (doing insurance business in CA as CFG STC Insurance Agency LLC), member FINRA/SIPC. Advisory services are offered through Cetera Investment Advisers LLC. Neither firm is affiliated with the financial institution where investment services are offered. Individuals affiliated with this broker/dealer firm are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services.

These products and services are being offered through Cetera Investment Services LLC or its affiliates, which are separate entities from, and not affiliates of, Centier Bank or Centier Investments. Securities and insurance products offered by Cetera Investments are: *Not FDIC/NCUSIF insured *May lose value *Not financial institution guaranteed *Not a deposit *Not insured by any federal government agency.

Click here to view Cetera Investment Services Privacy Policy, other Important Information and Business Continuity Plan.

This site is published for residents of the United States only. Registered Representatives of Cetera Investment Services LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Investment Services LLC site at