Did You Just Turn 73? Don’t Miss This Deadline for Required Minimum Distributions (RMDs) in IRS

If you’re 73 or older—or recently turned 73 in 2024—it’s time to pay close attention to your retirement accounts.

The IRS has issued an important reminder about Required Minimum Distributions (RMDs), the mandatory withdrawals from certain retirement plans.

Missing this deadline could lead to costly penalties, but staying informed and acting now can help you avoid unnecessary stress.

Here’s what you need to know about RMDs, the updates introduced by the SECURE 2.0 Act, and how to ensure compliance.
 

What Are RMDs?

RMDs are mandatory withdrawals that account holders of traditional IRAs, 401(k)s, 403(b)s, and similar plans must take annually starting at age 73 (previously 72, before SECURE 2.0).

These withdrawals are considered taxable income and help ensure funds in tax-deferred accounts aren’t sheltered forever.

If you turned 73 in 2024, you have until April 1, 2025, to take your first RMD. After that, annual withdrawals must be made by December 31 of each year.
 

SECURE 2.0 Act Changes

The SECURE 2.0 Act has made some notable changes to RMD rules:

1. Higher RMD Age: The starting age for RMDs is now 73, giving account holders more time to let their savings grow tax-deferred.
2. Eliminated RMDs for Roth 401(k)s and 403(b)s: Beginning in 2024, Roth accounts in workplace retirement plans are no longer subject to RMDs while the account owner is alive.

These updates provide more flexibility for retirement planning, but it’s still crucial to know the rules for your specific account type.

 

Key Points About RMDs

1. Traditional IRAs:

   • RMDs are required starting at age 73.
   • You can take the total RMD amount from one or multiple IRA accounts, as long as the annual requirement is met.

2. Roth IRAs:

   • Roth IRAs do not require RMDs during the account owner’s lifetime.
   • However, inherited Roth IRAs are subject to RMD rules.
3. Employer-Sponsored Retirement Plans:

   • RMDs apply to 401(k) and 403(b) plans unless the participant is still working and doesn’t own more than 5% of the business.

 

Penalties for Missing RMDs

Missing an RMD deadline comes with steep consequences.

The penalty is a 25% excise tax on the amount not withdrawn, reduced to 10% if corrected within two years.

To report a missed RMD, file IRS Form 5329 with your tax return.
 

Beneficiaries of Inherited Accounts

If you’ve inherited an IRA, retirement plan account, or Roth IRA, you may also be subject to RMD rules.

Factors like your relationship with the account owner and whether they passed away before or after starting RMDs will determine your obligations.

The IRS Beneficiary FAQs and Publication 559 provide additional guidance.
 

Tips to Stay Compliant

• Calculate Your RMD Correctly: Use the IRS RMD Worksheet or consult with your financial advisor to ensure accuracy.
• Plan Ahead for Taxes: RMDs are considered taxable income, so factor them into your tax planning to avoid surprises.
• Get Help: Work with your IRA trustee or plan administrator to calculate your RMD. Ultimately, you’re responsible for taking the correct amount, but professional guidance can reduce errors.

 

Act Now

Don’t let the year-end RMD deadline slip by.

Visit the IRS’ RMD FAQs for detailed guidance and tools. Staying proactive with your retirement planning helps ensure compliance, avoid penalties, and make the most of your hard-earned savings.

For additional resources and retirement planning assistance, visit IRS.gov today.

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