With the retirement of the baby boom generation right around the corner, the IRS put forth new requirements in 2004 to ensure retirees take their Required Minimum Distributors (RMD). Retirement account custodians are required to submit Form 5498 to the IRS for retirement account holders who have reached age 70 1/2. The 5498 will report the prior year-end value and will also indicate if the RMD for the year was satisfied before December 31. The account custodian will then follow up with a 1099R that indicates the RMD was satisfied by year-end.

So, what does this mean for you?
It's probably a good time to consider consolidating all retirement accounts. Since you will now be required to take a distribution from each account, not a lump sum from one account that covers the total RMD amount, this will help avoid a red flag from the IRS. This would also ensure that the requirement is fully satisfied each and every year. Otherwise, there is the potential to face a 50% excise tax penalty.

As an added bonus, you would also benefit from having all the investments in one place, allowing better control over investment choices and the ability to make sure these choices match your goals, risk tolerance, and time horizon. In addition, multiple custodian fees charged by investment firms could be avoided. The end result may be a less expensive and simpler way to review your account while also ensuring the IRS requirements are met.

Further, if you are a business owner or HR professional, you may want to make this information available to your employees; it would undoubtedly be helpful and much appreciated.