By Mike Kura, RFP
“On behalf of the board of trustees, we wish you a blessed Christmas and a big impact New Year.”
WHAT ARE RMDS? – A required minimum distribution (RMD) is the minimum amount of money that must be withdrawn from certain retirement savings accounts each year after a specific age. Typically, these distributions are subject to income tax.
WHO DO RMDS APPLY TO? – RMDs most commonly apply to the following types of retirement savings accounts: Traditional IRA, 401(k), 403(b), 457(b), SEP IRA, SIMPLE IRA, and other defined contribution plans. Roth IRAs are not in this list because the IRS does not require you to take withdrawals from Roth IRAs while you’re alive. Your beneficiaries may have to take RMDs after your passing, however.
WHEN DO YOU BEGIN TAKING RMDS? – Due to the passing of the SECURE act in 2020, there are different ages you may have to begin taking RMDs. For anyone who turns 70 ½ after January 1, 2020, you do not need to begin taking RMDs until you turn 72. Your first RMD must be withdrawn by
April 1 of the year after you reach 72. For each of the following years, you must take your next RMD by December 31 of each year. If you turned 70½ before January 1, 2020, you’ve already begun taking RMDs. The IRS does not take missing RMDs lightly and could hit you with a penalty as big as 50% of the RMD amount that was not withdrawn. For these reasons, it is certainly a good idea to get help from a financial advisor or tax professional who can help you with your specific situation.