Understanding Required Minimum Distributions (RMDs) for Older Adults
Once you reach age 73 and are no longer working, it’s time to start drawing funds from your retirement savings accounts to meet the required minimum distribution (RMD) for the year. RMDs apply to traditional IRA, SEP IRA, SIMPLE IRA, 401(k), 403(b), 457, and thrift savings plan accounts. Roth IRAs, Roth 401(k)s, and Roth 403(b)s are exempt from these rules.
Here are the key points to remember about RMDs:
- Starting RMDs: You have two options. You can begin taking RMDs in the year you turn 72 or wait until April 1 of the following year. If you choose the latter, you’ll need to take two distributions in that year.
For example, if you turn 73 on July 4, you can take your first RMD by December 31, or by April 1 of the next year. If you wait until April 1, you’ll need to take your second RMD by December 31 of that same year, resulting in two taxable distributions in one year. - Calculating RMDs: Each year, calculate your RMD to ensure you withdraw the minimum required amount. We can help with this calculation if you provide the Form 5498 documents from your retirement plan administrators.
- Waived 2024 RMD Requirements for Inherited Accounts: Recent IRS changes have waived 2024 RMD requirements for some non-spouse beneficiaries who inherited IRAs from account holders who had begun taking RMDs and passed away in 2023. Under the SECURE Act of 2019, non-spouse beneficiaries typically have 10 years to distribute all funds from an inherited IRA, with annual distributions expected. However, the IRS has extended relief for those inheriting accounts from 2020 through 2022, not requiring RMDs for these beneficiaries during this period.
Navigating RMDs can be complex, but with the right guidance, you can ensure compliance and make the most of your retirement savings.