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RMDs.
• Another way to avoid future RMDs is to convert your tax-deferred accounts into a Roth IRA. You'll still have to pay taxes on all pretax contributions and earnings that have accrued; and, if you're over age 70 ½, you must first take your minimum distribution (and pay taxes on it) before the conversion can take place.
• Ordinarily, RMDs must be taken by December 31 to avoid the excess accumulation tax. However, if it's your first distribution you may wait until April 1 the year after turning 70 ½ - although you're still must take a second distribution by December 31 that same year.
• Generally, you must calculate an RMD for each IRA or other tax-deferred retirement account you own by dividing its balance at the end of the previous year by a life expectancy factor found in one of the three tables in Appendix C of IRS Publication 590:
• Uniform Lifetime Table if your spouse isn't more than 10 years younger than you, your spouse isn't the sole beneficiary or you're unmarried.
• Joint and Last Survivor Table when your spouse is the sole beneficiary and he/she is more than 10 years younger than you.
• Single Life Expectancy Table is for beneficiaries of accounts whose owner has died.
• Although you must calculate the RMD separately for each IRA you own, you may withdraw the combined amount of all RMDs from one or more of them. The same goes for owners of 403(b) accounts. However, RMDs required from other types of retirement plans must be taken separately from each account.
• To learn more about RMDs, read IRS Publication 590 at www.irs.gov.
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• Jason Alderman directs Visa's financial education programs. To Follow Jason Alderman on Twitter: www.twitter.com/PracticalMoney