Your 70s represent a time to enjoy the fruits of your labor, but there's still work to do. Once you reach your applicable RMD age, you'll need to start managing one of the more complex and time-consuming aspects of retirement income planning: required minimum distributions (RMDs). Generally, individuals born between 1951 and 1959 begin RMDs at age 73, while those born in 1960 or later begin at age 75. Let's start with the basics:
What are required minimum distributions?
A required minimum distribution is the minimum amount you must withdraw from your tax-advantaged retirement account(s) each year, including IRAs (traditional, SEP, and SIMPLE), 401(k)s, and 403(b)s once you reach your applicable RMD age. You aren't required to take RMDs from Roth IRAs during your lifetime.
When do you have to begin withdrawing money?
IRS regulations generally require you to begin withdrawing a minimum amount of money from your retirement account(s) each year by April 1 of the calendar year following the year you reach your applicable RMD age. After that, RMDs must be taken each subsequent calendar year by December 31.
Why is this information important to you?
Calculating the correct RMD amount(s) across one or multiple retirement accounts is complicated. If you miscalculate or fail to take RMDs from one or more qualified plans, you can be vulnerable to hefty tax penalties.
Remember: You have help available to calculate the correct annual RMD amount across your retirement accounts. If you're interested in learning more about strategies to minimize the burden of managing RMDs, contact our office today to schedule a meeting. You can also use this to see if you can potentially avoid taking your RMD after reaching your required beginning date (RBD).
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.