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What are the required minimum distribution rules for annuities?

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Quick Answer

Among the rules set by the Internal Revenue Service, or IRS, regarding required minimum distributions (RDS) for annuities is that once the age of 70½ has been reached, the contributor is expected to start making removals, states FSD Financial Services. The deadline for removals is Dec. 31 every year.

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Full Answer

Required Minimum Distributions refer to the minimum amounts that must be removed from a tax-deferred plan once the age of 70½ has been attained. Examples of Tax deferred plans are Tax Sheltered Annuities, Traditional IRAs and Qualified Retirement Plans. Failure to make removals can attract a 50 percent tax penalty, states FSD Financial Services.

The deadline for initial RMD is April 1 of the year that follows the year the age of 70½ is attained. If the first removal is done on April 1, then two removals must be done during the following year. One must take place on April 1 and the other must take place by Dec. 31, explains FSD Financial Services. Participants of Tax Sheltered Annuities or Qualified Retirement Plans who own below 5 percent of business sourcing the contribution, and are still employed by the business in mention, the removal can be delayed until April 1 of the year after the age of 70½ is attained. Optionally, the delay can be extended till April 1 of the year following the year of retirement, states FSD Financial Services.

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