Congress suspended the required minimum distributions for IRA, 401(k) and other retirement plan investors age 70-1/2 last year, since people’s balances took such a hit the year before and many wanted to remain invested in hopes of a rebound. As the market has, indeed, rebounded nicely, Congress is likely to reinstate the RMDs this year, experts say.
The IRS calculates a person’s expected lifespan beginning at age 70 and asks investors to divide their remaining IRA balance by that figure to determine a minimum amount they must withdraw from their account each year. If not, investors are subject to a 50% penalty. Currently, a person age 70-1/2 must divide their balance by 24.7.
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