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4 Things You Should Know About Required Minimum Distributions (RMDs)

4 Things You Should Know About Required Minimum Distributions (RMDs)

About RMDs

If you have been participating in your retirement plan, your contributions have been accumulating tax-free. However, at a certain point, you must start withdrawing that money and paying taxes on the distribution. Read on for more about Required Minimum Distributions (RMDs).

1. RMDs Start At Age 70½ 

If you are no longer employed or if you're a 5 percent owner, you are required to take your RMDs starting at age 70½. The first RMD must be distributed no later than April 1st after you turn 70½. Subsequent RMD distributions must be made by December 31st each year.

2. Substantial Penalty for Not Taking Your RMD

Failure to withdraw your RMD on time (or failing to take the full RMD) can result in a penalty of 50 percent of the amount not withdrawn.

3. Formula for Calculating RMDs

Generally, a RMD is calculated for each account by dividing the balance as of December 31 of the previous year by a life expectancy factor.

4. Taxation of RMDs

Distributions are taxed based on the individual's income tax rate. The portion of an RMD that is a return of basis is tax-free. A qualified distribution from a designated Roth account is totally tax-free.

If you are over 70 years old (or will be turning 70 in the next year), determine your RMD amount for the current year using FINRA’s Required Minimum Distribution Calculator.

Note:

See the Internal Revenue Service's Retirement Plans FAQs regarding Required Minimum Distributions for additonal information.

Group annuity contracts are issued by American United Life Insurance Company® (AUL) and registered variable annuity products are distributed by OneAmerica Securities, Inc., a Registered Investment Advisor, Member FINRA, SIPC, One American Square, Indianapolis, IN 46282, 1-877-285-3863. McCready and Keene, Inc. and OneAmerica Retirement Services LLC provide administrative and recordkeeping services and are not brokers/dealers or an investment advisors. Neither AUL, OneAmerica Securities, McCready and Keene, OneAmerica Retirement Services nor their representatives provide tax, legal or investment advice.

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