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What Are RMDs and What to Know About RMDs and Retirement Planning

Updated: Dec 15, 2023

a man with glasses writing in a notebook what are rmds

As you plan for retirement, understanding the intricacies of Required Minimum Distributions (RMDs) is essential. These regulations have evolved over the years and might continue to do so in the future. For instance, the coronavirus relief bill temporarily waived RMDs for many individuals with tax-deferred retirement accounts in 2020. Now, in the current year, RMDs are back in effect. So, what do you need to keep in mind as you move forward on your retirement journey?

Types of Accounts Subject to RMDs

RMD rules extend to various retirement plans, including 401(k)s, Roth 401(k)s, 403(b)s, 457(b)s, and traditional IRAs.

When do RMDs Start?

The rules concerning the age at which RMDs begin have shifted due to legislative changes. The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) modified the age requirements for RMDs.

Previously, those who turned 70 1/2 years old in 2019 were obligated to take their first RMD by April 1, 2020. After the SECURE Act's implementation, the rule shifted to requiring individuals to take their initial RMD by April 1 of the year following their 72nd birthday.

Calculating Your RMD

To determine your RMD, the IRS provides tables that account for your life expectancy. After finding the relevant life expectancy factor, divide your account balance as of December 31 of the previous year by that factor. It's important to note that new life expectancy tables will be effective beginning in 2022.

Consequences of Neglecting an RMD

Failure to withdraw the mandated RMD amount by the specified deadline results in a tax penalty of 50% on the amount that should have been withdrawn from your account.

Staying Current with Recent Developments

As you may know, the coronavirus relief bill temporarily waived RMDs for 2020. Moreover, recent news indicates that individuals already taking an RMD this year have until August 31 to roll that amount back into their retirement accounts.

Contact Us for Personalized Guidance on What Are RMDs and More

Contact us for more specific insights about your circumstances, including what are RMDs and what to know about RMDs and retirement. Whether you're curious about RMDs or other financial aspects of your retirement planning, our team is here to provide comprehensive guidance.

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