Not quite a year ago, I reported that Congress was considering suspending the required minimum distribution (RMD) requirement for retirees. The reason for this is that the stock market had just collapsed, and they didn’t want retirees being forced to liquidate holdings at the bottom.

While Congress ultimately acted, it was a classic case of too little, too late. What I mean by this is that they did wind up suspending the RMD, but they did so for 2009 instead of 2008.

What is the RMD?

Just to remind you, the RMD is the minimum amount that retirement account holders must withdraw from their tax-deferred accounts when they hit the age of 70-1/2. Your RMD is based on what was in your account on the last day of the previous year, so…

If the market tanks, you’ll need to withdraw a disproportionately large amount from your account

Should you skip your RMD?

To me, the issue of whether or not you should skip your RMD in 2009 hinges on your circumstances. If you need the money to get by, then you don’t have much of a choice.

If, on the other hand, you don’t have a compelling need, you should seriously consider leaving the money in place. Tax-deferred retirement accounts are powerful tools. By leaving your money in place, you’ll avoid paying additional taxes this year, and your investments will have even more time to recover.

If you’ve already taken your RMD in 2009 and wish you hadn’t, you might be in luck. As long as you get the money back into your IRA within 60 days, you can “undo” the withdrawal.