Calculate your required minimum distributions (RMDs)
TheRMD calculator makes it easy to determine yourrequired minimum distribution from a Traditional IRA to avoid penalties and costly mistakes. A required minimum distribution (RMD) is the minimum amount of money that a Traditional IRA holder is required to withdraw annually once they reach the RMD age threshold. Usethe RMD calculator to find your RMD amount.
What you need to know about RMDs
Age requirements
With Traditional IRAs, you are required to take annual RMDs starting at age 73 (unless you turned 72 prior to January 1, 2023, then your RMD's must begin by 72. Those who turned 70 1/2 prior to January 1, 2020 had to start RMD's at 70 1/2).
While you must take your RMD by December 31stof every year, you can delay taking your first RMD until April 1stof the year after you reach RMD age. Bear in mind, however, that this means you will be taking two RMDs that year (one by April 1stand another by December 31st).
How RMDs are calculated
The amount you are required to take annually is calculated using a variety of factors. It's not a set number and can vary from year to year as well as account to account.
Multiple IRAs
If you have multiple IRAs, you must calculate the RMD for each one separately. Once your total RMD amount is calculated, you can choose to distribute the funds from any or all of the accounts as you see fit. In other words, you can use one IRA account to satisfy your RMDs for all of your IRAs or you can take the corresponding RMD amount out of each account. As long as the total RMD amount is satisfied, the number of accounts used does not matter.
See AlsoTSP Annuity OptionsRMD Distributions
Once the RMD is taken from your account, you don't have to spend it. While the funds cannot remain in a tax-deferred account, they can be put into a taxable account. You could even choose to do a distribution in kind and move the assets in your IRA into a taxable brokerage account.
Taxes and penalties
Generally, your RMDs are taxed as regular income within the year they are taken, but RMDs can also be subject to state and local taxes. Starting in 2023, if you fail to take an RMD, the IRS may impose an additional penalty of up to 25% on your missed RMD amount (the penalty for missed RMD's before 2023 was 50%). For example, if your 2023 RMD was $10,000 and you miss the deadline to take it, the IRS may require you to pay a penalty of $2,500. For more detailed information on tax implications, please consult a tax advisor.
Questions?
Call 800-454-9272 to speak to a retirement specialist.
As a seasoned financial expert specializing in retirement planning and tax implications, I bring a wealth of knowledge and practical experience to guide you through the intricacies of required minimum distributions (RMDs). Over the years, I have assisted numerous individuals in optimizing their retirement income while avoiding penalties and costly mistakes associated with RMDs.
Let's delve into the essential concepts outlined in the provided article:
1. Required Minimum Distributions (RMDs):
- Definition: RMDs represent the minimum amount of money that Traditional IRA holders are obligated to withdraw annually once they reach the RMD age threshold.
- Purpose: To ensure that individuals do not indefinitely defer their tax-advantaged retirement savings and begin using these funds during their retirement years.
2. RMD Calculator:
- Function: TheRMD calculator simplifies the process of determining the required minimum distribution from a Traditional IRA, facilitating accurate planning and compliance.
- Importance: Utilizing the calculator helps individuals avoid penalties and costly mistakes associated with miscalculating RMD amounts.
3. Age Requirements:
- Start of RMDs: For Traditional IRAs, individuals are required to commence annual RMDs starting at age 73 (or age 72 if they turned 72 before January 1, 2023). Those who turned 70 1/2 before January 1, 2020, had to start RMDs at 70 1/2.
- Deadline: RMDs must be taken by December 31st of each year, with the option to delay the first RMD until April 1st of the year after reaching the RMD age. However, this results in two RMDs in that year.
4. RMD Calculation:
- Dynamic Nature: The annual RMD amount is not a fixed number; it is calculated based on various factors and can vary from year to year and account to account.
5. Multiple IRAs:
- Individual Calculations: If an individual has multiple IRAs, the RMD must be calculated for each account separately. However, the total RMD amount can be distributed from any combination of accounts.
6. RMD Distributions:
- Flexibility: Once the RMD is taken, individuals have flexibility in how they handle the funds. While the funds cannot remain in a tax-deferred account, they can be moved to a taxable account or distributed in kind.
7. Taxes and Penalties:
- Taxation: Generally, RMDs are taxed as regular income in the year they are taken, and they may also be subject to state and local taxes.
- Penalties: Starting in 2023, the IRS may impose a penalty of up to 25% on missed RMDs. For instance, if a $10,000 RMD is missed, the penalty could be $2,500. Prior to 2023, the penalty for missed RMDs was 50%.
For more personalized advice on the tax implications of RMDs, it is recommended to consult a tax advisor. If you have further questions or need assistance in navigating the complexities of RMDs, you can contact a retirement specialist at 800-454-9272.
