A required minimum distribution (RMD) is the amount of money that must be withdrawn from a qualified retirement account, such as a 401(k) or 403(b), or an IRA, including traditional, SEP, and SIMPLE IRAs.
The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) made major changes to RMD rules. Individuals must take their first RMD by April 1 of the year after they reach age 73 (SECURE Act 2.0).
|Question||IRAs (Including SEPs and SIMPLE IRAs)||Qualified Plans|
|When must I begin taking RMDs?||By April 1 of the year following the year you turn age 73 regardless of employment||By April 1 of the year following the year you turn age 73 or terminate employment, whichever comes later (if plan allows)
If you are a 5% owner, you must begin RMDs by April 1 of the year following the year you turn age 73
|After the first RMD, when must I take subsequent RMDs?||You must take subsequent RMDs by December 31 of each year beginning with the calendar year of your required beginning date|
|How do I calculate my RMD?||To calculate your RMD, you simply divide your account balance as of December 31 of the previous year by the distribution period that corresponds with your age in the Uniform Lifetime Table (Table III in IRS Publication 590-B, Distributions Individual Retirement Arrangements (IRAs))
If your spouse is your sole beneficiary and is more than 10 years younger than you, you will use the Joint Life and Last Survivor Expectancy Table (Table II in IRS Publication 590-B)
For Qualified plans, your plan sponsor should calculate the RMD for you
(Refer to the IRS website for RMD worksheets: https://www.irs.gov/retirement-plans/plan-participant-employee/required-minimum-distribution-worksheets)
|What if I have multiple accounts/plans?||If you have multiple IRAs, you must calculate RMDs for each IRA separately each year
However, you may aggregate your RMD amounts for all of your IRAs and withdraw the total from traditional IRA sources such as SEP or SIMPLE, or a portion from each of your IRAs – you do not have to take a separate RMD from each IRA
|If you have multiple qualified plans, you must calculate and withdraw RMDs for each plan separately each year
There is an exception if you have more than one 403(b) tax-sheltered annuity account – you can total the RMDs and then take them from any one (or more) of the tax-sheltered annuities
|Can I withdraw more than the RMD?||Yes, but you cannot apply the excess withdrawals to future years’ RMDs|
|Can I take multiple withdrawals in order to meet the RMD?||You may take multiple distributions throughout the year in order to meet the RMD|
|What are the penalties if I do not take the RMD?||You are subject to an additional tax equal to 25% of the undistributed RMD If the late RMD is corrected in a timely manner, the tax can be reduced to 10%|
|Can I roll over my RMD?||No|
|If I am still working after 72, can I postpone my RMD until I retire?||No||Yes, considering you do NOT own 5% or more of the business sponsoring the retirement plan
If you meet this criteria and your plan allows, you may delay taking an RMD from the account until April 1 of the year after you retire
|If I am still working after 72, can I roll over a portion of my 401(k) account without satisfying my RMD?||Not applicable||Yes, considering you do NOT own 5% or more of the business sponsoring the retirement plan and your plan allows for it1|
1 Please reach out to your plan provider to ensure the RMD requirement is met before rolling the account over to an IRA.
Stifel does not provide legal or tax advice. You should consult with your legal and tax advisors regarding your particular situation.