At the end of 2008, President Bush signed a bill that suspended required minimum distributions from IRAs for the year 2009. We have already done two blog posts about this very welcome provision, but there are a lot of fine points to be aware of so, prepare yourself for post number 3...
First, it is important to note that the Act pertains to IRAs, Inherited IRAs and 401(k) and 403(b) plans. Many people think that only IRAs were included. That is not the case. So, if you are the beneficiary of an inherited IRA, you can (and probably should if you are able) skip your 2009 withdrawal. This is also the case if you were caught in the five year distribution rule. If 2009 was one of the five years you were supposed to take a distribution, you can skip 2009 and add one more year to the tail end of the five year period you were originally drawing the account over. If 2009 was the last year of the five year period, you can now move your final withdrawal to as late as December 31, 2010. That should give your account a little more time to recover.
If you turned 70 1/2 in 2008, you must still take your 2008 distribution even if you had intended to delay that distribution until April 1, 2009. That is because the distribution was for the tax year of 2008 and there was no suspension of that distribution. If you turned (or will turn 70 1/2) in 2009, your first distribution does not have to be taken until December 31, 2010.
When required minimum distributions return for the 2010 tax year, things will be business as usual and the distribution will be based on your account balance as of December 31, 2009.
In my opinion, this one year suspension is a wonderful thing. If you are at all able to avoid taking your 2009 RMD, you probably should. And remember, you are always free to take a withdrawal that is less than what your RMD would have been.
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