IRS Releases Final RMD Revisions

April 17, 2002 ( - The Internal Revenue Service has released the final version of new significantly simpler rules governing money that retirement savers are required to withdraw from their plans as required minimum distributions (RMD).

New RMD rules, which go into effect January 1, 2003, are much easier to decipher. The simplification is particularly true in how much investors have to withdraw each year from their retirement accounts after reaching age 70.5, or face penalties, according to a Dow Jones report.

For example, the new rules cut the previous eight minimum distribution choices to two – one rule for married people with spouses ten years younger than they and the second for everyone else.

Retirement plan participants can also take payments over a longer period than before based on new life-expectancy tables.

Roth IRAs are exempt from minimum distribution requirements because the money is taxed before it is invested.

Uncle Sam Collects

On the other hand, the government requires minimum distributions on retirement accounts that are funded with pretax money. The idea behind minimum distributions is that they allow the government to begin collecting taxes on the money before a beneficiary dies.

People can begin tapping their retirement accounts after age 59.5.
The IRS said for this year, people who are required to take minimum distributions can use the final rules, the proposed rules published last year, similar to the final rules, or rules issued in 1987.

In a related issue, the IRS also said it was asking for comments on required minimum distributions from defined benefit plans and annuity contracts that provide retirement benefits by July 16, 2002. The comments can be submitted electronically at .

The revised retirement plan required minimum distribution rules are published in The Federal Register .