Understanding Required Minimum Distributions from Retirement Accounts Under New Laws by Rick D. Bazzani, CPA

Posted on April 19, 2024 by Rick Bazzani

There is a broad range of opportunities to save money during your working years so that you may afford a comfortable retirement in the future. Yet, with each type of retirement savings plan comes a unique set of rules and requirements, including procedures for paying taxes on your plan contributions and earnings. In the most basic terms, you either pay taxes when you contribute to your plan or when you take IRS-required withdrawals in retirement.

What is an RMD?

A required minimum distribution (RMD) is the lowest amount of money you must annually withdraw from certain retirement accounts and pay income tax on once you reach a certain age. These tax-deferred accounts include traditional individual retirement accounts (IRAs), simplified employee pension (SEP) IRAs, savings incentive match plans for employees (SIMPLE) IRAs and workplace 401(k)s, 403(b)s and 457(b)s retirement plans.

By contrast, original owners of Roth IRAs do not have RMD requirements; they pay taxes on contributions up front in exchange for tax-free withdrawals in retirement. Beginning in 2024, RMDs also are eliminated for Roth 401(k)s and Roth 403(b)s.

When Must I Take RMDs?

Effective for tax year 2023, you generally must begin taking RMDs by April 1 of the year after you turn age 73. Therefore, if you turned 72 in 2023, you must take your first RMD for the 2024 tax year by April 1, 2025. RMDs in subsequent years must be taken by December 31 of the distribution year (i.e., a 2026 RMD must be taken by December 31, 2026). In 2025, however, the SECURE Act 2.0 calls for the RMD age to increase to 75.

If your plan is not an IRA and you are not a 5 percent owner in the business sponsoring the plan, you can delay your first RMD until the date you stop work, provided that occurs after the year you reach your RMD age.

If the owner of an IRA or defined contribution plan dies before taking their first RMD, eligible beneficiaries, including surviving spouses, minor children and dependents with disabilities, may treat those accounts as their own and delay RMDs until the later of the year the original owner would have reached the statutory age or the year the beneficiary attains that age. All other beneficiaries who inherit IRAs in 2020 or later must withdraw the entire balance of those accounts within 10 years of the original owner’s death.

How Do I Calculate an RMD?

The amount of your RMD changes each year based on the account balance in your retirement account as of December 31 of the previous year and your life expectancy, which the IRS updates and publishes each year. Generally, you must separately calculate your RMDs for each qualifying retirement account you own. While you must take separate RMDs for each of your 401(k) and 457(b) plans, you may take the total amount of your IRA RMDs from one or more accounts.

What Happens if I Miss a Required Minimum Distribution?

Under SECURE Act 2.0, an account owner who fails to take an RMD or who takes less than required by December 31 will be subject to a 25 percent excise tax on the undistributed amount, half the penalty applied in prior years. For owners of IRAs, the excise tax can be reduced to 10 percent of the undistributed amount when they take steps to correct their mistakes in a timely manner.

About the Author: Rick D. Bazzani, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he provides individuals and entrepreneurs with a broad range of tax-efficient estate, trust and gift-planning services.  He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or