As you approach your RMD age, it’s essential to understand the rules and implications of required minimum distributions from retirement accounts. The SECURE Act 2.0 has adjusted the RMD age for those born between 1951 and 1959, changing it to 73, and for those born in 1960 or later, to 75.
RMDs are mandatory withdrawals from most retirement accounts after reaching a certain age, including Traditional IRAs, SEP IRAS, SIMPLE IRAS, 401(k) and 403(b) plans. However, Roth IRAs do not require RMDs during the account holder’s lifetime.
Missing an RMD deadline can result in a penalty of 25% of the RMD amount, reduced to 10% if corrected promptly. To avoid penalties, it’s crucial to act promptly and review critical issues such as first-year timing, withdrawal sufficiency, tax withholding, Roth conversions, reinvesting surplus RMDs, inherited accounts, and mitigating RMD tax implications.
Some strategies to mitigate RMD tax implications include:
* Qualified Charitable Distributions (QCDs)
* Strategic withdrawals
* Tax diversification
* Leveraging employer plans
It’s also essential to consider real-life examples and final thoughts. Review your RMD strategy annually, and consult a Certified Financial Planner if needed.
Note: SECURE Act 2.0 was mentioned in the article but its full impact is not discussed here.
Source: https://www.forbes.com/sites/jbrewer/2024/12/05/need-to-beat-the-required-minimum-distributions-rmds-deadline