WASHINGTON, D.C. — The Internal Revenue Service (IRS) has issued a notice to retirement account owners aged 73 and older, reminding them of the deadline to take required minimum distributions (RMDs) and emphasizing changes introduced by the SECURE 2.0 Act.
RMDs are mandatory annual withdrawals from certain retirement accounts, considered taxable income. Failing to withdraw the required amount on time incurs a 25% excise tax penalty, which can be reduced to 10% if corrected within two years.
The SECURE 2.0 Act raised the RMD starting age from 72 to 73 for retirement account holders beginning in 2023. Additionally, it eliminated RMD requirements for Designated Roth accounts in 401(k) and 403(b) plans, effective from 2024. Roth IRAs remain exempt from withdrawals during the account owner’s lifetime, while beneficiaries of inherited Roth accounts are still subject to RMD rules.
Key RMD Rules and Deadlines
- Traditional IRAs and IRA-based plans: RMDs must begin at age 73, with the first withdrawal deadline extended to April 1 of the following year for those reaching the age milestone. Subsequent RMDs are due annually by December 31.
- Employer-sponsored plans: RMDs are required at age 73 but may be delayed until retirement unless the account holder owns more than 5% of the sponsoring business.
- Inherited IRAs: Rules for inherited accounts depend on factors such as the beneficiary’s relationship to the deceased and whether the original account owner died before or after starting RMDs.
The IRS also advised that account owners are responsible for calculating and ensuring the correct amount is withdrawn annually, with assistance available from IRA trustees or plan administrators. Worksheets and tools for RMD calculations are available on the IRS website.
This reminder aims to inform individuals of their responsibilities regarding RMDs and the potential consequences of not adhering to the rules.
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