Required Minimum Distribution rules require millions of investors and account holders of IRAs, 401Ks and other qualified retirement plans who are age 70 1/2 or older to withdraw a certain amount of money each year from their retirement accounts. These withdrawals are called required minimum distributions, or RMDs, and typically are subject to tax.

In late 2008, then-President George W. Bush signed legislation that generally suspended RMDs for IRAs, 401(k) plans and other retirement accounts for 2009 only. That action was praised by many investors who didn't want to be forced to withdraw funds from their hard-hit accounts.

Unless Congress and President Obama take action this year, investors will be required to take RMDs for 2010.Suspending the rules would be very costly to the Treasury Department at a time of great concern about massive federal budget deficits projected for years to come.

The RMD rules can be very tricky. Retirement account holders over 70 1/2 should contact their tax advisor to determine what level of distribution they are required to take.  Many recipients of distributions opt to receive their distribution at year end .Details on RMD rules are available at the IRS Website.

If an account holder does not need the distribution, waiting until late in the year to determine if the moratorium will be renewed is a viable way to hedge.

If you have any questions regarding RMDs or any other aspect of retirement planning and taxation, please contact our office for guidance.