How to Suspend Retirement Account Payouts

You don't have to take required minimum distributions from an IRA or 401(k) this year -- so let your account manager know if you want automatic withdrawals to stop.

Kimberly Lankford
By
published
in How-to

I know that a new federal law suspended the requirement to take minimum distributions from retirement accounts in 2009. But I had signed up to receive automatic payouts every month. Will I be able to suspend my 2009 payouts without affecting the automatic-payout schedule for 2010? And is there anything I can do about the payouts I have already received for the first few months of 2009?

The procedures can vary by plan, so it's important to ask your plan administrator for specifics. But in general, most major mutual fund companies and brokerage firms are continuing to make regular IRA and 401(k) payouts to people who have been receiving automatic withdrawals, unless they hear otherwise.

"Since many of Vanguard's clients depend on distributions via our RMD [required minimum distribution] service as a regular source of income, we wanted to ensure that our shareholders on a fixed budget wouldn't find themselves unexpectedly unable to pay their mortgage or their medical bills, while enabling those wanting to defer their 2009 RMD the opportunity to do so," says Amy Chain, of Vanguard, one of the largest investment-management companies.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%
https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

Most firms are making it easy to call customer service, go online or fill out a paper form to suspend automatic distributions for 2009. With some firms, such as Fidelity and T. Rowe Price, your automatic withdrawals will resume in 2010, when people older than 70½ must start taking required minimum distributions again. Ask your administrator about its rules -- the way you request the suspension may affect whether you'll need to contact the administrator again to start receiving regular withdrawals next year.

People who receive automatic payments they don't want can generally roll the funds back into an IRA within 60 days without having to pay taxes on the distribution.

For more information about the suspension of required minimum distributions for 2009, see Who Has to Take an IRA Distribution in '09.

Kimberly Lankford
Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.