If you’re 73 or older and have tax-deferred retirement accounts, it’s crucial to know about Required Minimum Distributions (RMDs). These mandatory withdrawals ensure the government collects taxes on income that’s been deferred over the years. With the year-end fast approaching, now is the time to ensure you’re meeting these requirements to avoid costly penalties.
What Are RMDs?
RMDs are the minimum amount you must withdraw annually from most retirement accounts, including:
Traditional IRAs
SEP IRAs
SIMPLE IRAs
401(k) and 403(b) accounts (if you’re retired)
Roth IRAs are not subject to RMDs during your lifetime, though they may be for your beneficiaries.
The amount you must withdraw is determined by the IRS, based on your account balance as of December 31 of the prior year and a life expectancy factor from the Uniform Lifetime Table. For example, if your account balance was $500,000, your RMD will be calculated by dividing that amount by your IRS-assigned life expectancy factor.
Key Deadlines to Remember
If you turned 73 this year, you have until April 1 of next year to take your first RMD.
For all subsequent years, including your second RMD, the deadline is December 31 of the current year.
Keep in mind that delaying your first RMD means you’ll need to take two withdrawals in one year, which could increase your taxable income.
What Happens If You Miss the Deadline?
Missing the RMD deadline triggers a steep penalty: 50% of the amount not withdrawn. For example, if your RMD is $10,000 and you fail to take it, you’ll owe the IRS $5,000 in addition to regular income taxes.
Strategies for Managing RMDs
Plan Withdrawals Early: Avoid a year-end rush by scheduling your withdrawal in advance.
Consider Qualified Charitable Distributions (QCDs): If you’re charitably inclined, you can direct up to $100,000 of your RMD to a qualified charity, satisfying your requirement and excluding the amount from your taxable income.
Reinvest Your RMD: If you don’t need the money for expenses, consider reinvesting it in a taxable brokerage account to keep it working for you.
How TruAdvisors Can Help
Navigating RMDs can feel overwhelming, but TruAdvisors is here to make it easier. Our experienced team can help you calculate your RMD, strategize for tax efficiency, and ensure you meet all deadlines.
Don’t wait until the last minute—reach out to us today for personalized guidance. Let’s work together to make your retirement as stress-free and financially secure as possible.
Contact TruAdvisors now for your free consultation. We’ll help you make the most of your retirement savings!
📞 Call us today at (888)-721-2040
💻 Or schedule your appointment online: https://calendly.com/truadvice
Let’s build a brighter financial future together!
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