One of the most important factors of educating yourself on required minimum distributions (RMDs) is understanding the IRS requirements. Here are a few things to keep in mind as you navigate your RMDs this year.
Withdrawal amount: The amount you must withdraw is based on the value of each retirement plan as of December 31 of the previous year. While there’s no maximum withdrawal amount, it’s usually better to defer taxes by stretching your distributions out over your lifetime
Income Taxes: You must pay taxes on the amount you withdraw at your personal federal income tax rate.
Tax Penalty: Any insufficient amounts or late RMD withdrawals are subject to a penalty of 50% of the shortfall.
Individual Retirement Accounts: If you have multiple IRA accounts, you can combine the RMDs and take a single distribution from just one of the accounts. There are no RMDs for Roth IRAs, so distributions made from these accounts don’t satisfy RMD requirements.
Qualified Retirement Plans: If you have multiple 401(k)s, 457(b)s or inherited accounts, you cannot apply the same consolidation. Each account will have an RMD that must be taken from that account alone.
Inherited IRAs: Are subject to RMDs as well, regardless of your age.
We want to emphasize that RMDs do not need to be a stressful experience for you. We am here to help explain RMD guidelines and help you avoid the tax penalties for failure to meet these requirements.