Required Minimum Distributions (RMDs)

Unfortunately, the IRS does not allow you to keep funds in your retirement accounts indefinitely.

Traditonal (Pretax Contributions) Retirement Accounts

Generally, you must start taking withdrawals from your IRA, SEP-IRA and/or retirement accounts when you reach age 70½.  However, due to certain provisions of the SECURE Act of 2019, if your 70th birthday is July 1, 2019 or later, you do not have to take withdrawals until the year in which you reach age 72.

Your Required Minimum Distribution (RMD) is the minimum amount that you must withdraw from your account each year. The RMD for any year is calculated by dividing the account balance as of the end of the immediately preceding calendar year by the distribution period from the IRS “Uniform Lifetime Table” that applies to you (there are three such Tables).  A separate table is used if the sole beneficiary is the owner’s spouse who is ten or more years younger than the owner.

These RMD rules apply to the following retirement accounts:

  • Traditional IRAs
  • SEP-IRAs
  • SIMPLE IRAs
  • 401(k) plans
  • 403(b) plans
  • 457(b) plans
  • Profit sharing plans
  • Other defined contribution plans

Beginning Date for First RMD

For IRAs, SEP-IRAs and SIMPLE IRAs, the beginning date for your first RMD is either:

  1. If you were born before July 1, 1949, April 1 of the year following the calendar year in which you reach age 70½
  2. If you were born after July 1, 1949, April 1 of the year following the calendar year in which you reach age 72

For 401(k), 403(b), profit sharing and other defined contribution plans, the beginning date for your first RMD is either:

  1. If you were born before July 1, 1949, April 1 of the year following the calendar year in which you reach age 70½
  2. If you were born after July 1, 1949, April 1 of the year following the calendar year in which you reach age 72, or
  3. When you retire (if your plan allows this option)

You may always withdraw more than the minimum amount required.

Tax Tip

If you don’t need the funds you receive from a Traditional retirement plan RMD to supplement your operating budget, consider a Roth Conversion.  Yes, you will still have to pay the income tax liabilities incurred because you received the Traditional retirement plan RMD.  However, now these funds can capitalize on The Power of Compounding and grow tax-free for the rest of your lifetime.

Roth (After Tax Contributions) Retirement Accounts

Roth IRAs, 401(k) and 401(b) retirement plan accounts do not require withdrawals from such accounts until after the death of the account owner.

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