What is an RMD?
Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your IRA accounts each year when you reach a certain age set by the IRS. The RMD is calculated according to IRS regulations and is calculated separately for each IRA.
The RMD must be received as a taxable distribution. It may not be rolled over into another IRA. An IRA owner may transfer the RMD to another IRA, as long as the RMD based on those assets is distributed by the deadline.
At what age am I required to start taking Required Minimum Distributions (RMDs) from my Traditional IRA?
Starting in 2022, you are required to begin taking Required Minimum Distributions (RMDs) from your Traditional IRA at age 73. This change, implemented by the SECURE 2.0 Act, increased the RMD age from 72 to 73. Since the age requirement may change, be sure to verify the latest information with the IRS.
How is the RMD calculated, and what factors influence the amount I must withdraw each year?
Required Minimum Distribution (RMD) is calculated by dividing your previous year-end retirement account balance by a life expectancy factor provided by the IRS, which is based on your age as of December 31st of the previous year; the key factor influencing the amount you must withdraw annually is your life expectancy, meaning the older you get, the larger your RMD will generally be.
Can I delay my first RMD if I’m still working past the specified age for mandatory distributions?
Yes, you can delay your first required minimum distribution (RMD) from your workplace retirement plan if you’re still working and meet certain conditions:
- You’re not a 5% owner of the business that sponsors the plan.
- You continue to work for the business.
- You can delay your RMDs until the year you retire.
For more information, please consult with your tax advisor.
RMD Deadline
An IRA owner generally must receive an RMD by December 31 of the current year. One exception to this deadline is the first year that an RMD is due. This RMD may be delayed until April 1 of the following year. This is called the required beginning date (RBD).
If an IRA owner chooses to delay receiving the first year’s RMD, she must still receive the second year’s RMD by December 31 of that year. As a result, the IRA owner will receive two RMDs in the same year.
To determine the year an IRA owner will turn 73, simply add 73 to the owner’s birth year.
What happens if I fail to take the full RMD amount from my Traditional IRA?
If you don’t take the full RMD amount from your Traditional IRA by the deadline, you’ll face a penalty tax of 25% of the amount you didn’t withdraw.
Are RMDs applicable to Roth IRAs, and if so, when do they come into effect?
No, RMDs (Required Minimum Distributions) are not applicable to Roth IRAs during the account owner’s lifetime, meaning you do not need to take withdrawals from a Roth IRA while you are alive; RMDs only apply to Roth IRAs after the owner’s death, when beneficiaries inherit the account and must take distributions according to specific rules.