Fidelity Gm Pension Payments: Are They Rmds?

General Motors (GM) and Fidelity Investments provide access to benefits such as pension information, payment summaries, and savings and retirement plans. Required Minimum Distributions (RMDs) are an important part of retirement income plans, with rules and deadlines for withdrawals. However, it is unclear whether the GM pension payment from Fidelity Investments is classified as an RMD. A GM pension recipient expressed concerns about delayed payments, highlighting the complexity of pension administration.

GM pension payments and Fidelity Investments

General Motors (GM) and Fidelity Investments work together to provide access to benefits for GM employees. This includes pension information, which can be accessed from the Savings & Retirement area of the GM benefits website. Here, employees can also change their tax withholdings and bank information.

Fidelity Investments is the administrator of GM pension payments. However, in one instance, a GM employee reported that they were not receiving their pension payments, and Fidelity could not provide an explanation for the delay.

Fidelity's website provides information on required minimum distributions (RMDs) and how they may apply to certain retirement accounts. RMDs are withdrawals that must be taken from most qualified retirement accounts, such as IRAs and 401(k)s, once the account holder reaches the age of 73. There are exceptions to RMD rules, and they do not always apply to certain accounts during the lifetime of the original owner. It is important to consult a financial professional to understand the specific rules and requirements regarding RMDs.

RMD rules and exceptions

Required Minimum Distributions (RMDs) are annual withdrawals that you must make from your retirement accounts once you reach the age of 73. These withdrawals are mandatory and if you don't take them, you may be subject to a penalty. The RMD is the minimum amount you must withdraw each year, but you can always withdraw more than the minimum amount if needed.

There are some exceptions to the rules around taking RMDs. For example, if you are still working after turning 73, you may not have to take RMDs from certain workplace accounts. Additionally, RMDs do not apply to Roth IRAs during the lifetime of the original owner, or to participants in 401(k) plans who are less than 5% owners, until they retire.

The amount of your RMD is calculated by dividing the value of your retirement account by a life expectancy factor, as determined by the IRS. You can calculate your RMD for each account separately, and you have the flexibility to take your total RMD amount from either a single account or a combination of accounts. However, RMDs from Qualified Retirement Plans or Inherited IRAs must be calculated separately and can only be taken from their respective accounts.

The deadline for taking your first RMD is normally April 1 of the year after you turn 73, and December 31 of each subsequent year. It is important to meet these deadlines, as the IRS penalty for not taking an RMD, or for taking less than the required amount, is significant: 25% of the amount not taken on time. This penalty may be reduced if the taxpayer takes the missed distributions within a specific timeframe.

There are several options for how to use your RMDs, depending on your financial needs and situation. You can invest it, spend it on current living expenses, or donate it to an eligible charity with a qualified charitable distribution (QCD). It is important to plan ahead and understand the RMD rules and options to ensure you are meeting IRS requirements and avoiding costly tax mistakes.

RMD calculation and withdrawal

Required minimum distributions (RMDs) are the minimum amounts that you must withdraw from your retirement accounts each year. These mandatory withdrawals are an important part of your retirement-income plan, but they come with strict rules about the timing of distributions and a formula based on your age for the amount you have to take.

In general, you must be aged 73 to start taking withdrawals from most qualified retirement accounts, such as IRAs and 401(k)s. However, there are some exceptions to the rules around taking RMDs. For example, if you're still working after turning 73, you may not have to take RMDs from certain workplace accounts. Additionally, participants in a workplace retirement plan can delay taking their RMDs until the year they retire, unless they own 5% or more of the business sponsoring the plan.

The deadline for taking your first RMD is usually April 1 of the year after you turn 73, and December 31 of each following year. However, if you choose to wait until April 1 of the year after you've turned 73 for your first RMD, you will need to take two RMDs that year, which may have tax implications. The IRS penalty for not taking an RMD, or for taking less than the required amount, is 25% of the amount not withdrawn on time. This penalty may be reduced if the missed distributions are taken within a specific timeframe.

The amount of your RMD is usually determined by the fair market value (FMV) of your IRA as of December 31 of the previous year, factored by your age and your life expectancy using the uniform life expectancy method. You can calculate your RMD using an online calculator or by consulting a financial professional.

It's important to plan ahead for what you want to do with your RMDs. You have several options for how to use your withdrawals, depending on your financial needs and situation. You can invest it, spend it on current living expenses, or gift it to an eligible charity with a qualified charitable distribution (QCD).

RMD deadlines and penalties

Deadlines and penalties are a crucial aspect of Required Minimum Distributions (RMDs). The IRS mandates that individuals start taking withdrawals from their qualified retirement accounts when they reach the age of 73. While Roth IRAs are exempt from this rule, beneficiaries of these accounts are subject to RMD rules.

The deadline for your first RMD is April 1st of the year after you turn 73, and December 31st for subsequent years. It's important to meet these deadlines, as the IRS imposes a significant penalty of 25% on the amount not withdrawn on time. However, if you correct the shortfall within two years, the penalty may be reduced to 10%.

If you miss an RMD deadline, there are a few steps you can take:

• Request a Waiver: If you believe you missed the deadline due to a reasonable error, you can ask the IRS to waive the 25% excise tax by filing IRS Form 5329 and providing an explanation.
• Pay the Excise Tax: If you don't qualify for a waiver, you must calculate and report the excise tax on Form 5329 and Form 1040, and include it with your federal tax return for the year the RMD shortfall occurred.
• Withdraw the Full Balance: For inherited accounts, beneficiaries must also take RMDs and can avoid the excise tax by withdrawing the entire balance in certain cases.

To avoid missing RMD deadlines, it's recommended to make arrangements with your custodian for systematic or automatic withdrawals, submit withdrawal requests well in advance, and regularly check your account statements to ensure the correct amount has been distributed.

Using RMDs for investments, expenses or donations

While Required Minimum Distributions (RMDs) are mandated by the Internal Revenue Service (IRS) and must be withdrawn from retirement accounts by the account holder once they reach the age of 73, there are several options for how to use this money.

Investments

If you don't need your RMD for daily living expenses, you can transfer the amount from your retirement account to a taxable brokerage account and then reinvest according to a strategy that suits your needs. You could also use the money to fund a 529 college savings account to give someone's education a head start.

Expenses

RMDs can be used to make ends meet, pay off expensive debt, or bolster your emergency fund.

Donations

You can donate your RMD to an eligible charity with a qualified charitable distribution (QCD). The QCD amount counts toward your RMD for the year, up to an annual maximum of $105,000 per individual, or $210,000 for a married couple filing jointly ($105,000 from each of their respective IRAs). It's not included in your gross income and does not count against the limits on deductions for charitable contributions.

Frequently asked questions