What You Need to Know About Required Minimum Distributions
If you’re turning 73 in 2024, you’ll want to be aware of your required minimum distribution
Your RMD is the minimum amount you must withdraw from your qualified retirement account
each year. This applies to all employer sponsored retirement plans, including profit-sharing
plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs
and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs. Roth IRAs do not require
withdrawals until after the death of the account owner.
If you own more than one IRA account, you must calculate the RMD separately for each IRA,
but you can withdraw the total amount from one or more of the IRAs. Similarly, a 403(b)
contract owner must calculate the RMD separately for each 403(b) contract, but can take the
total amount from one or more of the 403(b) contracts.
RMDs required from other types of retirement plans, such as 401(k) and 457(b) plans, must be
taken separately from each of these plan accounts.
- You can withdraw more than the minimum required amount.
- Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).
- The required beginning date for RMDs is April 1st of the calendar year following the year
you turn 73.
Many opt to take their first RMD by December 31 of the year they reach 73, because if you wait
until April 1 of the following year, you will need to take your second RMD by December 31,
2025—hence, two distributions in one year that you will owe taxes on. For example, you turn
73 in June of 2024. You may delay your first RMD to April 1, 2025, however, you will need to
take a second RMD by 12/31/2025.
Every year, the RMD from an IRA is calculated by dividing the IRA balance as of December 31st
of the preceding calendar year by the applicable life expectancy factor from the IRS tables. You
can find the tables at the IRS website.
Don’t forget to take your annual RMD as you will face substantial penalties for noncompliance.
If you have any questions, please see your tax or investment advisor.