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IRS Reminds Senior Citizens to Take RMDs from IRAs
The Internal Revenue Service is warning taxpayers born before 1951 to look into taking required minimum distributions (RMDs) from IRAs and other retirement plans by Dec. 31. RMDs are considered taxable income, and taxpayers may be subject to penalties if they don’t take them in time.
The agency noted that the age for when you must begin taking RMDs was increased to 73 in 2023 by the SECURE 2.0 Act; it had previously been 72. Meanwhile, individuals born in 1951 must receive their first RMD by April 1, 2025.
The IRS offers a RMD Comparison Chart explaining several of the rules apply to IRAs and defined contribution plans. Among the basic rules:
• For IRAs. Taxpayers have to take RMDs from IRAs, SIMPLE IRAs and SEP IRAs every year once they reach age 72 ( or 73 if the account owner reaches age 72 in 2023 or later), even if they’re still employed. Roth IRA owners don’t have to take RMDs, but after their death, their beneficiaries will be subject to the RMD rules.
• For retirement plans: RMD rules apply to employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans and 457(b) plans. Participants can delay taking RMDs until they retire (unless they are a 5% owner of the business that sponsors the plan). Designated Roth accounts in a 401(k) or 403(b) plan are subject to the RMD rules for 2023, but starting in 2024, they will not be subject to the rules while the account owner is still alive.
More Information from the IRS About RMDs
Taxpayers who fail to take withdrawals and want to correct that need to file Form 5329, “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts,” with the federal tax return for the year in the RMD was required but not taken.
For more information, see the Retirement Plan and IRA Required Minimum Distributions FAQs.
These worksheets can help calculate RMDs and the appropriate payout periods.