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Each year the Internal Revenue Service (IRS) reminds taxpayers over age 73 that they should take a required minimum distribution (RMD) by December 31.
The one exception is for IRA owners who turned age 73 in 2024. These individuals may delay their first RMD until April 1, 2025. However, if they delay the first RMD, they will also need to take a second RMD by December 31, 2025.
RMDs are generally required for most qualified retirement plans. They apply to three types of IRAs: Individual Retirement Arrangements, Simplified Employee Pension (SEP) IRAs and Savings Match Plans for Employees (SIMPLE) IRAs.
The RMDs also apply to traditional 401(k), 403(b) and 457(b) plans. An exception to the RMD withdrawal requirement is a Roth IRA, Roth 401(k) or Roth 403(b) – there are no 2024 distribution requirements for these plans if the original owner is living.
Most taxpayers take the RMD based upon the Uniform Lifetime Table in IRS Publication 590-B. This table assumes there is a beneficiary 10 years younger than the IRA owner and calculates a distribution amount based on both ages. If the IRA owner has a spouse more than 10 years younger, a special calculation is applicable.
Owners of multiple IRAs must calculate the RMD for each plan. However, the owner can elect to withdraw the total RMD amount from any IRA plan.
Some employees over age 73 who are still working and are not major owners of a business may be able to defer RMDs until after retirement. You should consult your tax advisor if this exception applies to you.
Many online calculators are available to determine your RMD. Most large financial companies offer an online determination of the correct amount. RMDs start at approximately 3.7% of the December 31 IRA balance. They increase each year after age 73. There are also online worksheets on IRS.gov that may be helpful.
The IRS released new IRA distribution tables for 2022 and subsequent years. The new tables reflect longer life expectancies and RMDs are somewhat reduced.
Editor’s Note: An excellent way to fulfill an RMD is to give part or all of the IRA payment to a qualified charity. Qualified charitable distributions (QCDs) for individuals over age 70½ may fulfill part or all of your RMD. The QCD is a transfer directly from the IRA custodian to a qualified charity. For 2024, you can transfer up to $105,000, which is the maximum annual limit and is indexed for inflation. It is important to act quickly if you plan to do a QCD this year. Your QCD must be completed by December 31, 2024.
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