The ABCs of RMDs: Your 10-step Guide to Required Minimum Distributions

As retirees enter their 70s, one key consideration looms large: required minimum distributions (RMDs). These mandatory withdrawals from traditional IRAs and other retirement accounts are a vital component of post-retirement planning, and understanding their nuances can help you make informed decisions about your financial future. Let’s take a look at the essentials of RMDs and what they mean for your retirement journey.

Your required minimum distribution is a minimum amount that you need to withdraw from your traditional IRA, SIMPLE IRA or SEP IRA (and several employer-sponsored retirement plans) every year. Currently, this distribution starts in the year that you turn 73. In 2029, this increases to age 74 and in 2033 to 75.
If you have separate IRA accounts, you must keep track of the RMD amount for each account. Combined, this will be your total RMD amount. The total amount can be withdrawn from one or more of the IRAs.
To calculate your RMD, use the previous year-end market value and a life expectancy factor provided by the IRS.
Each withdrawal is subject to income tax. Speak to your tax advisor to see if you should be withholding any taxes prior to distribution.
You can always withdraw more than your RMD in any year.
If you turn 73 in 2024, your first RMD can be delayed until April 1, 2025. However, you would also have to withdraw a second RMD for 2025 as well. Again, review strategies with your financial advisor or tax professional.
Roth IRAs are not subject to RMDs—and they grow tax-free!
If you are still working at age 73, you may be able to delay taking an RMD (from your company retirement plan) until after you retire.
Remember, failing to take your RMD will result in a substantial penalty.
Your financial advisor or tax professional can help you sort through the ins and outs of RMDs as they relate to your retirement savings, cash flow and overall portfolio.

Whether it’s understanding the timing of withdrawals, the tax implications, or potential strategies to optimize your distributions, we’re here to guide you with insights tailored to your unique financial situation. By staying informed and proactive about required minimum distributions, you can ensure that you continue to move through retirement with confidence and clarity.

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