Required Minimum Distribution (RMD) Optimization

You cannot keep retirement funds in your account indefinitely. You generally have to start taking withdrawals from your IRA, SIMPLE IRA, SEP IRA, or retirement plan account when you reach age 72 (73 if you reach age 72 after Dec. 31, 2022 and 75 after Dec. 31, 2032). 

Roth IRAs do not require withdrawals until after the death of the owner; however, beneficiaries of a Roth IRA are subject to the RMD rules. Designated Roth accounts in a 401(k) or 403(b) plan are subject to the RMD rules for 2022 and 2023. However, for 2024 and later years, RMDs are no longer required from designated Roth accounts. 2023 RMDs due by April 1, 2024, are still required.  

Your required minimum distribution is the minimum amount you must withdraw from your account each year.  If you have multiple accounts that are subject to RMD, you can select one account and take funds sufficient to cover the amount required from all accounts.

• You can withdraw more than the minimum required amount.
• Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).

Do these rules apply to my retirement plan?

The minimum distribution rules discussed below apply to original account holders and their beneficiaries in these types of plans:

Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans 457(b) plans, profit sharing plans, other defined contribution plans, and Roth IRA beneficiaries

Calculating the required minimum distribution

The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’s “Uniform Lifetime Table.”  At year end a financial organization must provide the RMD amount to the IRA owner. The statement must notify the IRA owner that the financial organization will report to the IRS that the IRA owner is required to take an RMD for the year.

Extra taxes for not taking RMDs

If you don’t take any distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required.     For more detailed information, feel free to contact us at Federal Benefits Advisors.

IF ALL OF THE ABOVE SEEMS TOO COMPLICATED, JUST CONTACT US, WE CAN WALK YOU THROUGH IT ALL. 

Source:  3/11/2025  https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics

Marilyn M. Miller is a registered investment advisor, dba Federal Benefits Advisors, in the State of Washington. This advisor may not transact business in states, where it is not appropriately registered, excluded or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.

Marilyn M. Miller is a registered investment advisor, dba Federal Benefits Advisors is not affiliated with or endorsed by the U.S. Government, the U.S. Armed Forces, any of the federal benefit programs, the State of Washington, any Washington State Agency, or any of the Washington state benefit programs. Marilyn M. Miller, Registered Investment Advisor dba Federal Benefits Advisors nor its representatives do not provide legal or tax advice.