As individuals transition into retirement, many face new financial planning challenges. For those turning 73 in 2024, an important deadline looms: they must begin taking Required Minimum Distributions (RMDs) from their individual retirement accounts (IRAs) and workplace retirement plans like 401(k)s by April 1, 2025. This requirement is designed to ensure retirees receive steady income during their retirement years.
Understanding RMD Rules and Deadlines
RMDs represent the minimum amount that must be withdrawn each calendar year, but those who reach 73 in 2024 have the option to delay their first withdrawal until April 1, 2025. This special provision applies to IRA holders and retirement plan participants born after December 31, 1950.
It's crucial to note that the April 1 deadline only applies to the first RMD. Subsequent annual distributions must be taken by December 31 each year. This means retirees taking their first RMD by April 1, 2025 for 2024 must also take their second RMD by December 31, 2025. The first distribution taken in 2025 will be reported on the 2025 tax return alongside any regular 2025 distributions.
Accounts Subject to RMD Requirements
The RMD rules apply to:
- Traditional IRAs
- Simplified Employee Pension (SEP) IRAs
- Savings Incentive Match Plan for Employees (SIMPLE) IRAs
- 401(k) plans
- 403(b) plans
- 457(b) plans
Notably, Roth IRAs are exempt from RMD requirements during the account owner's lifetime.
Calculating Your RMD
IRA trustees are required to inform account holders of their RMD amount or offer calculation services. Typically, this information appears in Box 12b of Form 5498. For 2024 distributions due by April 1, 2025, the amount will be listed on the 2023 version of Form 5498.
Most taxpayers can calculate their RMD using Table III (Uniform Lifetime Table) available on the IRS website. For those whose spouse is more than 10 years younger and is the sole beneficiary, Table II should be used instead. For someone turning 73 in 2024, the RMD is typically calculated by dividing the December 31, 2023 account balance by 26.5 (the distribution period from Table III).
Exceptions and Special Cases
While most traditional IRA holders and workplace retirement plan participants must take RMDs by the deadline, some workplace plans may allow delayed withdrawals. Most participants can wait until April 1 following retirement, though this exception doesn't apply to:
- 5% business owners
- SEP IRA participants
- SIMPLE IRA participants
Public school employees and certain tax-exempt organization workers with pre-1987 403(b) plan accumulations should consult their employer or plan administrator for guidance.
IRS Resources and Tools
The IRS provides comprehensive resources for RMD-related questions, including:
- Detailed FAQs on RMDs
- Worksheets and examples in the IRA Required Minimum Distribution Worksheet
- Life expectancy tables in Appendix B of the IRA withdrawal guide
For additional information about RMDs and other changes affecting retirees and retirement plan participants, visit the "Tax Information for Older Americans and Retirees" section on the IRS website.