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New rules for retirement plan RMDs just got even more confusing

Some seniors have enough income coming in from various sources that they don’t need to withdraw money they’ve saved in tax-advantaged retirement accounts.

But after years of waiting, the IRS eventually wants the taxes due on such accounts, forcing investors to take required minimum distributions, or RMDs, from their individual retirement accounts (IRAs) and/or workplace retirement plans such as a 401(k).

Readers have often complained to me about RMDs, including their fear of the huge penalty for failing to withdraw the correct amount.

Under the Secure Act, which stands for Setting Every Community Up for Retirement Enhancement, the age requirement for RMDs got bumped up from 70½ to 72. So, if you turn 70½ in 2020, you don’t have to take an RMD until you’re 72.

Take note that if you reached 70½ in 2019 and started taking RMDs, you have to stick to that schedule.

Now comes the confusing part.

If you turned 70½ in 2019, you can delay your RMD until April 1, 2020.

Here’s how this bonus time works. You have until April 1 of the following year after reaching the required age to begin taking your RMD. However — please stick with me on this — the April 1 RMD deadline only applies to the required distribution for the first year. Every year thereafter, you have to take your distributions by Dec. 31.

Here’s an example from the IRS on how the rule would apply going forward: John turns 72 on Aug. 20, 2021. He has until April 1, 2022, to take his first required minimum distribution, which would be based on his 2020 year-end balance. If John waits until April 1 to take his mandated distribution, he will still have to take an additional withdrawal by Dec. 31, 2022, based on his 2021 year-end balance.

Now back to folks covered under the old RMD provision. Just because you carried over your required minimum distribution obligation from 2019 into 2020 doesn’t mean you get to delay your withdrawals until you’re 72. You must still take the RMD no later than April 1 if you reached 70½ in 2019.

It’s easy to see why some folks are flummoxed.

Here’s why you do not want to miss the RMD deadline. If you don’t take any distributions, or if the distributions are not large enough, you may have to pay a 50 percent tax on the amount not withdrawn as required.

The IRS has encouraged financial institutions to remind people who turned 70½ in 2019 — but haven’t yet taken their 2019 RMDs — that they still have to take their distributions by the April 1 deadline. The agency recently issued a notice to financial institutions about reporting requirements for RMDs.

Here are the retirement accounts that fall under the RMD rules:

— Employer-sponsored retirement plans, including profit-sharing plans and 401(k), 403(b) and 457(b) plans.

— The Thrift Savings Plan (TSP), the federal government’s version of a 401(k).

— Roth 401(k). Even though you don’t have to pay income tax on the withdrawal, you still have to take an RMD. A Roth IRA does not require withdrawals until after the death of the owner.

— Traditional IRA.

— Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE).

But there are always exceptions and caveats in tax law. The IRS has an FAQ page if you need additional information.

If you’re still confused — and it’s understandable if you are — contact your financial institution. Just a reminder that you are responsible for making sure you take the correct RMD amount from your retirement account. Although your IRA custodian or retirement plan administrator may calculate your RMD, you’re ultimately responsible for calculating the correct amount of your RMD.

Reader Question of the Week

If you have a retirement question, send it to In the subject line, put “Question of the Week.”

Q: I know that the Federal Deposit Insurance Corp. (FDIC) protects funds up to $250,000 in various categories. However, are the limits for a $250,000 certificate of deposit (CD) in one bank and a $100,000 CD in another bank considered individually protected, or are they considered as a total of $350,000, and thus only $250,000 is protected for an individual, regardless of the fact that the money is held at different banks?

I asked the FDIC to address this question. Here’s what the agency provided.

A: In this scenario, the FDIC would insure this depositor’s combined $350,000 because we’re talking about two separate institutions. Hard to believe this would ever happen, given both institutions would have to fail. A more probable scenario would be if a depositor had several accounts at one institution and those combined deposits exceeded $250,000.

For more on this point, the FDIC provides the following answer on its website to this question: How much deposit insurance coverage do I qualify for?

A: The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category. For a basic category-by-category overview of FDIC deposit insurance coverage, you can use the “Account Categories” tool at FDIC also has a helpful “Deposit Insurance at a Glance” brochure that includes more comprehensive information and examples of deposit insurance coverage for various ownership categories.

Wondering how or whether retirement savings are protected? This column may clear things up.

Live Chat

Please join me on Thursday, Feb. 6, at noon (Eastern time) for a live discussion about your money.

I'll be taking your questions about the cost of college.

I’ll be joined by Melody Thornton, a certified public accountant and partner at Fitzgerald & Company. She is the chair of the statewide committee on taxation for the California Society of CPAs. She will be taking your questions about tax season 2020.

Retirement Rants and Raves

Your thoughts: What do you think about the new rule on RMDs?

I’m interested in your experiences or concerns about retirement or aging. You can rant or rave. Send your comments to Please include your name, city and state. In the subject line, put “Retirement Rants and Raves.”

Steve from Denver had two raves. “As a retired federal employee, my main rave is for OPM (Office of Personnel Management). They exceeded expectations at every step of the way by being timely, transparent and professional. My secondary rave is for the state of being retired. For me, it is much better than work. I still wake up screaming every morning at 4:30, but now I just smile and then go back to sleep for a couple of hours! While employed, I felt spread too thin and impatient with myself. But the other day, I got annoyed when working on a home project and thought my usual, ‘Hurry up, Steve, you don’t have all day.’ Then I began laughing because — as a matter of fact — I DID have all day. Such sweet luxury.”

Correction: An earlier version of this article included an example supplied by the IRS which contained a mistake. This has now been corrected.