Are You On Track With Your RMDs?

As the year winds down, it’s the perfect time to review your retirement account withdrawals. Whether you’re taking withdrawals from your own retirement accounts or managing inherited IRAs, staying on top of Required Minimum Distributions (RMDs) is essential for keeping your financial plan on track. RMDs from IRAs, 401(k)s, and other retirement accounts are mandatory once you reach age 73 (or 72 if you turned 72 before 2023). Missing a withdrawal, or taking the wrong amount, can trigger costly penalties. Understanding the rules helps you avoid surprises and keep more of your retirement income working for you.

Key Reminders

Here are a few key reminders to help you stay on track:

1. Check Your Deadlines: RMDs from non-inherited retirement accounts must be taken by December 31 of each year. If it’s your first year, you can delay until April 1 of the following year, but that could mean taking two RMDs in one year, which could bump you into a higher tax bracket.
2. Confirm Account Balances: RMDs are based on year-end account balances and your life expectancy factor. Make sure your custodian’s calculations align with your own records.
3. Coordinate Across Accounts: If you have multiple retirement accounts, you may be able to aggregate your RMDs for IRAs, but 401(k)s must be calculated separately.
4. Consider Charitable Giving: If you are charitably inclined, a Qualified Charitable Distribution (QCD) directly from your IRA can satisfy your RMD while lowering taxable income.
5. Don’t Overlook Inherited IRAs: If you inherited an IRA, RMD rules are different depending on whether the account owner passed away before or after 2020. Beneficiaries must generally withdraw the full account balance within 10 years under the SECURE Act, but some eligible designated beneficiaries may still take distributions over their life expectancy. It’s crucial to understand the timeline and rules to avoid penalties.