If you are 73 or older, remember to take your Required Minimum Distributions from any retirement plan or IRA you may have. As discussed in prior blog posts, Required Minimum Distributions (“RMDs”) are taxable amounts that account owners must withdraw annually if they meet the age requirement of 73. Failure to take an RMD on time may result in penalties.
Individuals (or their beneficiaries) with accounts in IRAs, 401(k) or other retirement plans must begin taking RMDs every year once they reach age 73. For those in IRAs, RMDs must be taken even if still employed. For individuals in an employer-sponsored retirement plan, RMDs may be delayed until retirement, unless the individual owns more than 5% of the business.
Thanks to SECURE 2.0, those with Roth IRAs or Roth accounts in 401(k) or 403(b) plans do not have to take RMDs as long as the account owner is alive. However, beneficiaries of Roth IRAs and Roth accounts are subject to the RMD rules. If you turned 73 in 2024 and are required to take an RMD, the deadline to take your RMD is April 1, 2025, based on your account balance on December 31, 2023. A second RMD must then be taken by December 31, 2025, based on your account balance on December 31, 2024.
An individual may always withdraw more than the minimum amount but the minimum must be taken. RMDs are includable in taxable income unless they are already taxed, such as with a Roth account. Trustees or plan administrators of IRAs and employer-sponsored plans must either report the RMD amount to you or offer to calculate it. While the trustee or plan administrator may calculate the RMD, the owner of the account has the ultimate responsibility for withdrawing the correct amount. RMD worksheets are available from the IRS, or you can speak with your accountant or financial advisor. For those with an IRA, each account must have its RMD calculated separately, but the entire amount for all accounts may be taken from one or several IRAs.
Failure to withdraw the full RMD amount by the deadline may result in a 25% excise tax on the amount not withdrawn. The 25% excise tax rate may be reduced to 10% if the error is corrected within two years.
If you have any questions about RMDs or retirement plans in general, please contact any of Bricker Graydon’s employee benefits team.
