forced IRA/401K withdrawals at age 70 to be suspended

So the 2009 RMD is susspended?

Seeing how the penalty for ~not~ taking out the RMD is suspended, that pretty much means that there is no tax downside for ~not~ taking the RMD. Cash flow needs will prevail here I suspect.

Or an opportunity to convert to Roth to fill the the tax bracket. I have an 82 yr old whose RMDs are getting up there. This will help that effort. Joe

It's not the penalty that is suspended. It is the actual requirement to take a mandatory distribution that was changed.

2009 is now excluded from the requirement. See below:

(a) In General- Section 401(a)(9) of the Internal Revenue Code of 1986 (relating to required distributions) is amended by adding at the end the following new subparagraph:

`(H) TEMPORARY WAIVER OF MINIMUM REQUIRED DISTRIBUTION- `(i) IN GENERAL- The requirements of this paragraph shall not apply for calendar year 2009 to-- `(I) a defined contribution plan which is described in this subsection or in section 403(a) or 403(b), `(II) a defined contribution plan which is an eligible deferred compensation plan described in section 457(b) but only if such plan is maintained by an employer described in section 457(e)(1)(A), or `(III) an individual retirement plan. `(ii) SPECIAL RULES REGARDING WAIVER PERIOD- For purposes of this paragraph-- `(I) the required beginning date with respect to any individual shall be determined without regard to this subparagraph for purposes of applying this paragraph for calendar years after 2009, and `(II) if clause (ii) of subparagraph (B) applies, the 5-year period described in such clause shall be determined without regard to calendar year 2009.'.

My eyes must be getting bad. I see this applying to IRSs and 457s and

403(b)s, but where does it mention 401(k)s?

of trust described in 401(a). The trusts described include defined contribution plans such as those you find in 401(k)(2).

That's weird... part of my reply shows up as part of your post. Hmmm. I must have started the reply on one of your lines.

As usual, they screwed up again. The relief was needed for 2008, not

2009 which will be greatly redeced anyway by using 1/1/09 values.

For instance, with the loss of values in 2008 my 2008 RMD( as required of about 5 1/2% of 1/1/08 values) will be just over 25% of my remaining capital.

Our beloved Congress has pretty well ignored any relief to the average taxpayer wihile bailing AIG, GM and the banks. What we could really use, in addition to increasing the amount of Capital Losses that can be applied to ordinary income, would be a year 2008 and 2009 tax law ammendment to add Capital losses in equities to NOL carrybacks.

ed

Are you sure about your numbers? 25% of current market value would mean that you lost 78% of your prior market value at 12/31/07.

.055(PMV) = .25(CMV) .055/.25 = CMV/PMV Loss In Value = 1 - .055/.25 = 78%

text -

thank's for the correction, Alan. You're right. I'm as bad at math as Congress. It was actually 19 %. The fund dropped 66% and my RMD was 5.4%. The 5.4% was 19% of the now remaing 28.6% of original value. The point, however, is that it's THIS year's RMD that is causing the problem, not 2009's.

ed

Naw; I don't think they screwed up. The purpose of the benefit of not having to take the 2009 distribution was not to help the investor (although it will, as I pointed out elsewhere, save me money and increase my daughter's eventual inheritance-taxable of course), but rather to induce investors to let it ride in the market and help keep investment capital available. Maybe some of the mutual funds will lend some to GM!

ChEAr$, Harlan Lunsford, EA n LA

President Elect Obama has asked Secretary Paulson to act on changing the 2008 RMD rules based on the fact that the RMD rules are embedded in Treasury Regulations and not the IRC. A quick review by me confirms that. The IRC (Sec 401(a)(9) and 408 (a)(6)) requires distribution over a lifetime and provides the beginning start date. It is the Treasury Regulations (1-401(a)(9)-2 thru -9) that prescribe the use of prior year-end balances and the life-expectancy factors to determine the RMD.

As Kaye Thomas has also observed, and further writes (one month ago, see the Fairmark home page for an update):

the administrative issues would be difficult to deal with, starting with the question of what to do with those who have already taken a distribution for 2008.

-Mark Bole

How about:

1. If you have not already taken the RMD: you can defer it to no later than 3/31/09 using 12/31/08 balances. This should provide IRA trustees and pension and annuity administrators enough time.

1. If you have already taken the RMD: you have the option to do nothing or you have until 3/31/09 to recompute the RMD using

12/31/08 balances and restore the excess to the IRA or pension plan. Restoring the excess to the IRA shouldn't be much of a problem but restoring the excess to a pension or annuity could be an administrative headache. This might require a deadline that goes beyond 12/31/09.

2a. Rule 2 should allow the taxpayer to rollover any recomputed pension/annuity excess to an IRA in lieu of trying to get it back into the pension.

Both of the above maintain the requirement that you distribute the balance over your lifetime and no distribution is missed.

A similar rule can be written for those who turned age 70 1/2 in

2008.

Harlan Lunsford wrote: ...

I think they messed up in that objective as well by not including '08.

One can only presume they didn't include this year owing to the nightmare of somehow dealing w/ those who have already taken theirs being at a disadvantage to those who waited.

Hmm. wait a minute. Your statement implies a certain logical thinking on the part of congress. Do you reckon they might ; just MIGHT have been thinking straight?

Nawwww.

ChEAr$, Harlan Lunsford, EA n LA

The recently enacted law, HR 7327, waives the RMD for 2009. My question is about someone who turned 70 1/2 in 2008 but did not take the RMD in 2008. Instead, the person intended to take the RMD in 2009 by April 1, 2009.

Does anyone think that the new law waiving the RMD for 2009 would apply to the first time RMD intended to be taken in 2009?

If you turn 70 1/2 in 2008, your RBD is 4/1/09 and your first distribution year is 2008. Therefore, the new law does not apply to you for 2008, as it only applies to the 2009 distribution year. You must take your 2008 distribution no later than your RBD.

Follow up: law signed and came into effect Dec 23.

Fidelity interprets it applying to all qualified retirement accounts and has been adjusting their software accordingly.