Required Minimum Distributions (RMDs)

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

Traditonal Retirement Accounts (Pretax Contributions)

For many years, IRS regulations required that you must start taking withdrawals, commonly referred to as “Required Minimum Distributions” (RMDs), from your Traditional IRA account when you reach age 70½.
One of the provisions of the SECURE Act 1.0 of 2019 increased the age at which RMDs would begin. If you were born after June 30, 1949, the beginning date for your first RMD must be no later than April 1st of the year following the calendar year in which you reach age 72.
One of the provisions of the SECURE Act 2.0 of 2022 further increased the age at which RMDs would begin. If you were born in 1951 or later, the beginning date for your first RMD must be no later than April 1st of the year following the calendar year in which you reach age 73.
The Beginning Dates for the first RMD are summarized in the table below.

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
  • 401(k) plans
  • 403(b) plans
  • 457(b) plans
  • Profit sharing plans
  • Other defined contribution plans

All RMDs will be reported on a Form 1099-R and must be included in your taxable income in the year you received the RMDs.  The taxable amount reported on Form 1099-R will be an aggregate of the contributions you had made, plus interest, dividends and capital gains realized in that account.

Beginning Date for First RMD

The beginning date for your first RMD will be as follows:

Birth Year Tax Year RMD Age
Before July 1, 1949 Up through 2019 70 ½
July 1, 1949 through 1950 2020 through 2022 72
1951 through 1959 2023 through 2032 73
1960 and beyond 2033 and beyond 75

It is important to note that individuals can postpone taking their first RMD from their 401(k), 403(b), 457(b), profit sharing plan or other defined contribution plan as long as they continue to work full or part time for the employer offering the plan.
You may always withdraw more than the minimum amount required.
On March 7, 2023, the IRS provided guidance regarding the new SECURE Act 2.0 changes to RMDs. IRA owners who attain age 72 in 2023 will not have an RMD for 2023. IRA owners who attain age 72 in 2023 will have a required beginning date of April 1, 2025, instead of April 1, 2024. SECURE Act 2.0 did not change the required beginning date for IRA owners who attained age 72 prior to January 1, 2023. IRA owners who attained age 72 in 2022 are required to take 2022 RMDs by April 1, 2023.

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 Retirement Accounts (After Tax Contributions)

One significant advantage of Roth retirement plans is that they do not have Required Minimum Distribution (RMD) requirements for the original owner - unlike with Traditional retirement plans - which you must begin to tap at age 72.  This means you are not forced take out a certain amount each year so these funds can remain in the Roth plan, compounding tax-free.  If you don't need the money, you can let it continue to compound and grow in the Roth IRA tax shelter for the reminder of your life.

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