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Required Minimum Distributions – IRAs Versus Qualified Plans

What Is a Required Minimum Distribution (RMD)?


A required minimum distribution (RMD) is the amount of money that must be withdrawn from a qualified retirement account, such as a 401(k) or 403(b), or an IRA, including traditional, SEP, and SIMPLE IRAs.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 of 2019 (SECURE Act) made major changes to RMD rules. After January 2020, individuals must take their first RMD by April 1 of the year after they reach age 72, up from age 70 ½ in 2019.

With the COVID-19 pandemic came additional changes to these rules. On March 27, 2020, the White House approved a coronavirus emergency stimulus package known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act includes a provision permitting a one-year waiver of RMDs for defined contribution plans, including 401(k), 401(a), 403(b), 457(b), and 457(f) plans, as well as IRAs. This provision expired on January 1, 2021, and RMDs resume as normal for 2021.

Generally, the following rules apply to RMDs taken out of IRAs and qualified plans:



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 72 (70½ if you reached age 70½ before January 1, 2020) regardless of employment By April 1 of the year following the year you turn age 72 (70½ if you reached 70½ before January 1, 2020) 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 72 (70½ if you reached 70½ before January 1, 2020)
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 50% of the undistributed RMD
Can I roll over my RMD? No (exception was made for RMDs required in 2020 via CARES Act)
Are RMDs applicable to Roth IRAs and Roth 401(k)s? Unlike traditional IRAs, there are no RMDs for Roth IRAs during the account owner’s lifetime

However, if you have inherited a Roth IRA, you are subject to RMD rules, depending on the date of death: age 72 (70½ if they reached age 70½ before January 1, 2020)
Yes, RMDs do apply to Roth 401(k)s
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.

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