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Tax-deferred plans can be a great way to save money for retirement, but you can’t defer your tax liability forever. Once you reach age 70½, you must begin taking required minimum distributions (RMDs) from these plans each year or face a 50% penalty on the amount that should have been withdrawn. If you are still employed, you may be able to delay minimum distributions from your current employer’s plan until after you retire, but you still must take RMDs from other tax-deferred accounts (except Roth IRAs). The RMD is the smallest amount you must withdraw each year, but you can always take more than the minimum amount.

Basic Rules

Even though you must take an RMD for the tax year in which you turn 70½, you have a one-time opportunity to wait until April 1 (not April 15) of the following year to take your first distribution.

For example:
If your 70th birthday is in November 2015, you will turn 70½ in May 2016 and must take an RMD for 2016 no later than April 1, 2017.
You must take your 2017 distribution by December 31, 2017.
Your 2018 distribution by December 31, 2018.

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM Let’s sit down & look at your medicare and social security benefits to get the most for your retirement. Meet me for a FREE retirement strategy consultation at my office at (866) 471-7233 | MD, VA & DC.