Don’t forget about your RMD
Older adults who reach age 72 and are no longer working need to start drawing funds from their retirement savings accounts, making sure they meet their required minimum distribution (RMD) for the year. RMDs apply to funds saved in traditional IRA, SEP IRA, SIMPLE IRA, 401(k), 403(b), 457, and thrift savings plan accounts. The RMD rules do not apply to a Roth IRA, Roth 401(k), or Roth 403(b).
You only need to remember a few rules. First, you have a choice. You can begin taking RMDs in the year you reach age 72. Alternatively, you can wait and take your first RMD by April 1 of the following year. Remember that if you wait until April 1 of the next year, you are required to take two distributions in that year.
For example, if you turned 72 on July 4, 2023, you’ll take your first RMD either by December 31, 2023 or by April 1, 2023. For all subsequent years, you’ll need to take your RMD by the end of the year.
If you turn 72 on July 4, 2023, and decide to take your first RMD by April 1, 2024, this will satisfy your first RMD. (This makes the distribution taxable in 2024.) You’ll also need to take your second RMD by December 31, 2023. This satisfies your RMD for the year 2024. In this scenario, you have two distributions taxable in 2023. Going forward, for the year 2025, you’ll take your RMD by December 31, 2025.
Finally, determine how much RMD you need to take out. Each year, we need to calculate your required minimum distribution. This is the minimum amount you wíll need to withdraw from your retirement accounts to meet the requirement.
We can help you calculate your RMDs, so you can rest assured you’re meeting the requirement. All we need are the Form 5498 documents that your retirement plan administrators send you.