FIRST TIME RMDS AND SIMPLE IRA

CONTRIBUTIONS: TODAY'S SLOTT

REPORT MAILBAG
Thursday, February 04, 2021
By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:

I am going to turn 72 in December of 2021. When I take my RMD, what is the dollar
amount I use to calculate my RMD? Is it the account value ending December 31, 2020,
or December 31, 2021? Thank you for any clarification.

Bob

Answer:

Bob,

Since you turn 72 in December of this year, 2021 is your very first year for having to
take a required minimum distribution (RMD). Your RMD will based on the value of your
account as of December 31, 2020. Also, since 2021 is your first RMD, you can delay
taking that first RMD until April 1, 2022. However, if you delay, you will be required to
take two RMDs in 2022 – the 2021 RMD based on the December 31, 2020 balance,
and the 2022 RMD based on the December 31, 2021 balance.

Question:

I know that workers over 70 ½ can now contribute to a traditional IRA. Can they
contribute to a SIMPLE IRA? Thanks!

Sue

Answer:

Sue,

Yes, workers over age 70 ½ can contribute to a SIMPLE plan. Be aware that, while you
can contribute to a SIMPLE plan over the age of 70 ½, if you are subject to RMDs,
those dollars will also have to be withdrawn. That may create somewhat of a “revolving
door” of contributions and required minimum distributions.