Required Minimum Distribution

Investor Account Help: Transactions

When do I Need to Take an RMD?

Once you reach age 70 ½ the IRS requires you to take Required Minimum Distributions (RMDs) on most IRAs and retirement plans and pay income tax on the taxable portion of the withdrawal.

For the first RMD, in the year you turn 70 ½, you can take your RMD by December 31 or delay the RMD until April 1 of the following year.  This option is available for your first RMD only. If you decide to delay taking your first RMD, you will have to take two RMDs in that year which can put you in a higher tax bracket.

After your first RMD, subsequent RMDs must generally be withdrawn by December 31 of that year.

Contact Us if you have additional questions regarding taking an RMD from your account.

Quick Note:
Traditional IRAs, Rollover IRAs, SEP IRAs, SIMPLE IRAs and Keoghs, Traditional and Roth 401(k)s are all subject to required minimum distribution rules. Roth IRAs are not subject to RMD rules.

How Much Do I Need to Take?

RMDs are determined by your age, your account balance and your distribution period, as defined by IRS life expectancy tables.

To calculate your RMD, combine your IRA balances as of December 31 of the previous year, then divide that amount by a life expectancy factor (see IRS Publication 590 for the Uniform Lifetime Table, the most commonly used chart to figure mandatory distributions.) You can take more than your RMD; however, if you don’t withdraw at least the minimum amount, you will be subject to a 50% tax penalty on the difference of the amount you withdrew and the amount you should have withdrawn.

Contact Us for the RMD amount on your Homestead Funds account.

Quick Note:
If you don’t take the required minimum distribution from your account, you will be subject to a 50% tax penalty on the difference of the amount you withdrew and the amount you should have withdrawn.

Do I Need to Take an RMD for an Inherited IRA?

When you inherit an IRA, you will need to take RMDs. This applies to both inherited Traditional IRAs and inherited Roth IRAs.

Generally if you are a non-spouse beneficiary, you are required to begin RMDs for inherited IRA assets by December 31 of the year after the death of the IRA’s original owner. If you inherit an IRA from your spouse, you can choose to put the IRA assets into an IRA in your own name. If you roll the assets to your own name, the RMD will not be required until you are age 70 ½ and will be calculated based on your age. Only IRA beneficiaries who are the spouse of the deceased can put the inherited IRA assets directly in their name instead of an inherited IRA. Trust, charity, and entity beneficiaries may be required to fully distribute all assets by December 31 of the fifth anniversary year of the owner’s death if the IRA owner was younger than 70 ½ when they died.

Consult your tax advisor if you have specific questions regarding an inherited IRA RMD.

Quick Note:
If you don’t take the required minimum distribution from your account, you will be subject to a 50% tax penalty on the difference of the amount you withdrew and the amount you should have withdrawn.

What Can I Do with My RMD?

If you choose, you can request your RMD as a cash distribution and spend the money. If you don’t need to spend the money, you can reinvest the money into a regular account with Homestead Funds. We can transfer your RMD directly to that account for you. You may also consider using your RMD to fund an Education Savings Account or UGMA/UTMA account for your children, grandchildren, or other beneficiaries.

Use the Traditional/Inherited IRA Required Minimum Distribution Form to request your RMD paid to you or transferred into another non-IRA account with Homestead Funds. The form should be mailed to the address on the form or find it at Contact Us.

Contact Us if you have questions regarding what you can do with your RMD.


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