Taking the Mystery Out of Your RMD Age

Taking the Mystery Out of Your RMD Age

October 19, 2023

Our clients with a Traditional IRA, 401(k), 457 or 403(b) commonly ask us “when am I required to take money out of my account?” Their question refers to a Required Minimum Distribution or RMD.

Why is there a Required Minimum Distribution?

The Internal Revenue Service (IRS) established required minimum distributions (RMDs) to ensure that individuals cannot defer taxes on retirement accounts indefinitely. Consequently, individuals who saved for retirement in tax-advantaged accounts, such as traditional IRAs and similar plans, should begin withdrawing some money from those accounts once they reach a certain age.

What does this mean for me?

The age mandatory withdrawals begin depends on the client’s date of birth. Many clients assume the universal RMD age is 70 ½. Unfortunately, IRS rules are rarely simple. There is no universal RMD age. Due to the passing of the SECURE and SECURE 2.0 Acts, your RMD age may be 70 ½, 72, 73 or even 75.

How do you know?

To help determine when you must begin taking your RMD, we have created the chart below which allows you to line up your date of birth with the corresponding RMD age.

What happens if you don’t take your RMD?

If you don’t take your full required minimum distribution the IRS will impose a 25% penalty on the amount not withdrawn, this is an improvement over the 50% penalty that was in place prior to 2023. However, if you take the missed RMD this penalty may be dropped to 10% if corrected within 2 years. Our suggestion is to always satisfy your RMD.

Our goal is to help our clients take the mystery out of determining their RMD Age. Hopefully with this chart there is no more RMD Age confusion, you’ll need a good book to get your fill of suspense and mystery.