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Retirement means different things to different people. Some people look at this as the last chapter in a long life. They wish to slow down, travel a bit and spend more time with their families. Other people look at retirement as an opportunity to reshuffle the cards and pursue new dreams or passions that their earlier career did not provide. In either case the inevitable fact remains that the financial retirement plans they made years ago will now be put to task. Throughout your life, the government gave tax deductions for retirement contributions you made (and hopefully your employer as well) and then allowed you to defer paying tax on the earnings those funds generated each year. However, once you reach age 70½ the government forces you to begin taking distributions and paying tax on those retirement funds. That is why the distributions are called required minimum distributions (RMDs). But not every situation or type of retirement account is treated the same when it comes to RMDs. Here are some basics:

Roth IRAs - a Roth IRA owner is not subject to RMDs. A non-spouse beneficiary that inherits this type of account is subject to RMDs. A spouse beneficiary can elect to treat as her own and would therefore not be subject to RMDs.

Traditional IRAs - these accounts are always subject to RMDs. Owners, spouses and beneficiaries are all subject to RMDs.

Qualified plans - if the plan document contains a "still working exception," a less than five percent owner can defer RMDs until they actually retire. This exception only applies to that plan and only if still working for that employer. If you have switched jobs and left an account with your former employer that had this provision, it does not matter, you must take a RMD from that plan because you no longer work there. Ownership is also subject to attribution rules and interests owned by immediate family members can trip the five percent threshold. And once you are deemed a five percent owner (after attaining age 70½), the exception cannot be used in a future year if ownership decreases. If permitted, you can roll over other retirement accounts into this plan and delay taking RMDs on those funds as well.

Fortunate individuals may have more than one of these types of accounts when they retire. Planning is still important as RMDs can move individuals into different tax brackets and can be larger than usual if the individual was able to delay taking them. Making these plans is a team effort and should include your trusted professional from UHY Advisors.