RMD

[Janitor Bob]

Please excuse my ignorance in this area, but I am just now...after 12 years...having clients that are of age to begin RMDs.....My question is this:

Who notifies the client that they are to begin receiving RMDs and how does the process begin?

I have one client who will start RMD this year and she thinks I am the one that will work with her in it and start that process. I informed her that it would be the bank or whomever her retirement account is with....but she does not believe me.

I assume she will (or has) received some type of notification, but she claims she has not.

[JRS]

I have two clients who received Form 5498 stated they had until April 15, 2011 to begin their RMD. (The amount required was stated.) One more received a 5498 stating they would be required to take RMD in 2011.

[kcjenkins]

It is normal for the trustee institution to notify them, but let's face it, lots of clients either ignore them or think they are junk mail, or for some other reason they don't do what they should do about them. Some institutions automatically distribute the amount that would be required by the amount in that IRA, but not all do this, since some people choose to have it all distributed out of one of their several different accounts. If they have only one account, a simple call or letter to the institution should be all it takes to be sure that it's going to be done. But advise your client clearly that it is their responsibility to be sure that each year they take out at least the RMD. Tell them also that YOU can not do this, only the owner of the IRA can authorize the withdrawal. That lets you out of that trap.

[mcb39]

I get this question a lot and generally it is the financial institution that will notify them when and how much. However, as KC states, everyone doesn't read or understand their mail. Generally there is a toll free number that they can call just for peace of mind. I guess that I am really surprised how many people are aware of the requirement for minimum withdrawal and want to make sure that they don't miss it; or want to draw more than the minimum. I do a lot of tax planning in this area for clients who want to draw out enough to avoid taxation, if possible. Work up some "dummy" returns every year just to see where we are in the ballpark.

Ah, yes. As we age, so do they.