RMD Rules: A Simple Guide
Required Minimum Distributions (RMDs) mandate that retirees withdraw funds from their retirement accounts after reaching a certain age. These withdrawals ensure that deferred taxes get paid on money accumulated in accounts like traditional IRAs and 401(k)s. To avoid penalties, it’s essential to follow specific IRS RMD rules. Dimov CPA, NYC, is here to help you navigate these regulations.
Key Required Minimum Distributions Rules
The critical RMD rules include:
Starting Age
Starting in 2024, you must begin taking RMDs by April 1 of the year following your 73rd birthday.
First-Year Delay
While you can delay your first RMD until April 1 of the following year, it means you’ll need to take two RMDs in that same year.
Account Types
RMDs apply to traditional IRAs, 401(k)s, 403(b)s, and other tax-deferred retirement accounts. However, Roth IRAs are exempt during the account holder’s lifetime.
Annual Withdrawals
After the initial RMD, you must withdraw your RMD every year by December 31.
Multiple Accounts
If you own multiple retirement accounts, you must calculate each RMD separately. However, you can withdraw the total RMD from one or a combination of IRA accounts.
RMD Calculation
The RMD amount is determined by dividing your account balance by the IRS life expectancy factor, which depends on your age.
Penalties
If you fail to take your RMD, you risk a 50% excise tax on the missed amount.
Reporting Requirements
RMDs count as taxable income, and you must report them on your tax return.
Frequently Asked Questions
1. What are the RMD rules for 2024?
You need to start taking RMDs by April 1 of the year after turning 73.
2. What happens if I miss my RMD?
Missing an RMD results in a 50% penalty on the unwithdrawn amount, according to IRS rules.
3. Do RMD rules apply to Roth IRAs?
No, RMDs do not apply to Roth IRAs during the account holder’s lifetime.
