Individual retirement accounts (IRAs) were created to help you save your earned income and pursue your retirement goals. Eventually, you will have to start taking annual minimum withdrawals called required minimum distributions (RMDs) from your traditional, SEP, and SIMPLE IRA (but not Roth IRA), as well as qualified plans. Failure to do so will result in a 25% penalty on top of ordinary income tax for the undistributed amount, so it’s important that you understand the rules of these withdrawals.
RMD Rules of the Road
What about employer-sponsored plans like 401(k) plans?
What will my beneficiary need to know?
|AGE||LIFE EXPECTANCY FACTOR||AGE||LIFE EXPECTANCY FACTOR||AGE||LIFE EXPECTANCY FACTOR||AGE||LIFE EXPECTANCY FACTOR||AGE||LIFE EXPECTANCY FACTOR|
If the original IRA owner passed away prior to 2020, non-spouse beneficiaries use this table to calculate RMDs based on their own life expectancy in the year following death of the IRA owner. The factor is reduced by one each year going forward.
|AGE||BENEFICIARY LIFE EXPECTANCY FACTOR||AGE||BENEFICIARY LIFE EXPECTANCY FACTOR||AGE||BENEFICIARY LIFE EXPECTANCY FACTOR||AGE||BENEFICIARY LIFE EXPECTANCY FACTOR||AGE||BENEFICIARY LIFE EXPECTANCY FACTOR||AGE||BENEFICIARY LIFE EXPECTANCY FACTOR||AGE||BENEFICIARY LIFE EXPECTANCY FACTOR||AGE||BENEFICIARY LIFE EXPECTANCY FACTOR|
1 Prior to 2023, RMDs had to be taken by December 31 each year starting at age 72.
(The RMD age prior to 2020 was age 70 ½.)
2 Non-spouse beneficiary may still take RMDs over their life expectancy if: minor children of the deceased account owner, and individuals who are no more than 10 years younger than the deceased. Please note, once minor children reach the age of majority in their state, the ten-year rule will apply.
3 The same calculation and life expectancy factor can be used for Qualified Retirement Plan (QRP) RMDs; however, QRP RMDs cannot be taken from IRAs and vice versa. QRP RMDs (excluding 403(b)s) cannot be aggregated for RMD purposes and must be satisfied from each account or plan.
Please note that this information is for educational purposes only. Stifel does not provide legal or tax advice.
You should consult with your legal and tax advisors regarding your particular situation.