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Remember to Take Retirement Distributions

Retirement Distributions

If you are 73 years of age or older, the required minimum distributions (RMDs) from your retirement accounts are due by December 31. Learn how to avoid a penalty.

Remember to Take Retirement Distributions

After years of deferred taxes, Uncle Sam wants to collect some money from your retirement accounts. A required minimum distribution (RMD) is the amount of money that must be withdrawn annually from your retirement plan after you turn 73 years old, or you will be penalized. Once you reach this milestone, you must take an RMD each year by December 31. The time to take RMDs is upon us, so here’s what you need to know.

What Accounts Are Subject to RMDs?

RMDs apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, Rollover IRAs, most 401(k) and 403(b) plans, and most small business accounts.

When Do You Have to Take RMDs?

Your first RMD must be taken by April 1, following the year after you turn 73 years old. Subsequent RMDs must be taken by December 31 of each year. If you delay your first RMD until April 1 of the year after you turn 73, you must take two RMDs that year – one by April 1 and the other by December 31.

How Much Money Do I Need to Withdraw?

The financial institution that holds your retirement account as of December 31 should notify you of the RMD due for the year. To calculate your RMD, divide the account’s year-end value by the distribution period value matching your age on Dec. 31. You can find the table at irs.gov.

How Much is the Penalty if I Don’t Take the RMD?

If you don’t take the required distributions by December 31 or make an error on your distributions, the amount not withdrawn is subject to a 25% excise tax.

What Happens to My Taxes?

The withdrawals will count toward your total taxable income for the year, which may push you into a higher tax bracket.

What Should I Do with the Money?

Unfortunately, you can’t invest the money into another tax-deferred account, but there are other accounts that will enable your money to continue growing, such as a money market account, a term share certificate, or other investment accounts.

Let First Entertainment Help!

The RMD deadline is fast approaching, and with the holidays right around the corner, there’s a lot going on. Schedule an appointment now so that we can discuss strategies for your money.

Schedule an appointment today by contacting:

Michelle Lee, First Entertainment Credit Union Financial Advisor


First Entertainment Credit Union and First Entertainment Investment Services are not registered brokers/dealers and are not affiliated with Securities America. Securities America Advisors do not offer tax advice. Please consult a tax professional.