Traditional (Traditional IRAs, SEP, SIMPLE, SARSEP)
- RMDs begin at age 73
- In 2033 the RMD age goes to 75
- An IRA owner must calculate the RMD separately for each IRA they own, but can withdraw the total amount from one or more of the IRAs.
- A 403(b) owner must calculate the RMD separately for each 403(b) they own, but can take the total amount from one or more of the 403(b) accounts.
- RMDs required from other types of retirement plans, such as 401(k) and 457(b) plans, must be taken separately from each of the plan accounts.
Non-withdrawal penalties
- If an account owner fails to withdraw the full amount of the RMD by the due date, the amount not withdrawn is subject to a 50% excise tax.
- SECURE 2.0 Act drops the excise tax rate to 25%; possibly 10% if the RMD is timely corrected within two years.
Workplace Plans (401k, 403b, 457)
- Account owners in a workplace retirement plan (for example, 401(k) or profit-sharing plan) can delay taking their RMDs until the year they retire, unless they’re a 5% owner of the business sponsoring the plan.
- Roth IRAs do not require withdrawals until after the death of the owner. Beginning in 2024, RMDs in Designated Roth accounts in a 401(k) or 403(b) plan are no longer required from designated Roth accounts.
Inherited IRAs/Inherited Employer Plans
- For defined contribution plan participants, or IRA owners, who die after December 31, 2019, the SECURE Act requires the entire balance of the participant’s account be distributed within ten years.
- You must take an RMD for the year of the IRA owner’s death if the owner had an RMD obligation that wasn’t satisfied.
- An RMD may be required in years 1-9 when the decedent had already begun taking RMDs. There is an exception for:
- the IRA owners’ spouse
- the IRA owner’s minor child**
- an individual who is not more than 10 years younger than the IRA owner
- Disabled (as defined by the IRS)
- Chronically ill (as defined by the IRS).
**Once a minor child reaches the age of majority, they become subject to the 10-year rule.
- The 10-year rule applies regardless of whether the participant dies before, on, or after, the required beginning date. The required beginning date is the date an account owner must take their first RMD.
Five-year rule
- Any individual beneficiary may elect to distribute the inherited IRA assets over the five years following the owner’s death. The distribution must be completed by the end of the year containing the fifth anniversary of the owner’s death.
- Any non-individual beneficiary (except for a qualified trust) must use the five-year rule if the owner died before beginning to take RMDs.
Inherited Roth IRAs
- Generally, inherited Roth IRA accounts are subject to the same RMD requirements as inherited traditional IRA accounts.
- Withdrawals of contributions from an inherited Roth are tax free.
- Most withdrawals of earnings from an inherited Roth IRA account are also tax-free. However, withdrawals of earnings may be subject to income tax if the Roth account is less than 5-years old at the time of the withdrawal.
- Distributions from another Roth IRA cannot be substituted for these distributions unless the other Roth IRA was inherited from the same decedent.
IRS RMD Rules Document
