Understanding the changes to Required Minimum Distributions for IRAs and retirement plans in 2023
Attention, senior citizens and retirees: The IRS has just announced significant changes to the rules governing Required Minimum Distributions (RMDs) from your Individual Retirement Accounts (IRAs) and other retirement plans. Thanks to the SECURE 2.0 Act, these updates will provide you with greater flexibility and control over your retirement savings.
As a valued member of our senior community, it’s crucial for you to stay informed about the latest developments in retirement planning. Today, we’ll explore the concept of Required Minimum Distributions (RMDs) and how recent changes to the law might impact your retirement strategy. Our goal is to provide clear and concise information, suitable for individuals with varying levels of tax knowledge.
Understanding Required Minimum Distributions
Required Minimum Distributions (RMDs) represent the minimum amount you must withdraw from your IRA or retirement plan account once you reach a certain age. Thanks to the SECURE 2.0 Act, beginning in 2023, the age at which RMDs must begin has been raised to 73 for taxpayers turning 72 after December 31, 2022.
It’s important to note that Roth IRAs are exempt from RMDs until after the death of the original account owner. Designated Roth accounts in 401(k) or 403(b) plans are subject to RMD rules for 2022 and 2023. However, starting in 2024, RMDs will no longer be required from designated Roth accounts.
Meeting RMD Requirements with an IRA
To fulfill your RMD obligation, you can withdraw funds from one or more of your traditional IRAs, SEP, SIMPLE, and SARSEP IRAs. There’s no need to withdraw from each account individually, as long as the total amount withdrawn meets the RMD requirements for all IRAs combined. Here are some key milestones to keep in mind:
- If you turned 72 in 2022: Your first RMD is due by April 1, 2023, based on your account balance as of December 31, 2021. Your second RMD is due by December 31, 2023, based on your account balance as of December 31, 2022.
- If you turn 72 in 2023: No RMD is required for 2023. Your first RMD will be due in 2024 (the year you turn 73) and must be taken by April 1, 2025.
- If you turned 73 in 2023: Your first RMD (for 2022) is due by April 1, 2023, based on your account balance as of December 31, 2021.
Navigating RMDs for Retirement Plans
When dealing with RMDs for retirement plans, you’ll need to withdraw funds separately from each of your retirement plans to meet the requirements. If you turned 72 in 2022, your first RMD is due by April 1, 2023, based on your account balance as of December 31, 2021. Your 2023 RMD is due by December 31, 2023, based on your account balance as of December 31, 2022.
It’s worth noting that if you’re still employed by the plan sponsor and not a 5% owner, your plan may allow you to delay RMDs from that workplace retirement plan until you retire. However, the IRS requires you to take RMDs from traditional IRAs, SEP, SIMPLE, and SARSEP IRA plans beginning at age 72, regardless of your employment status.
For further information about the new RMD rules and how they affect your retirement planning, visit the latest RMD news release on the IRS website or consult IRS.gov/RMD. Embrace these changes as an opportunity to optimize your retirement savings strategy and make the most of your golden years.
***Disclaimer: This communication is not intended as tax advice, and no tax accountant -client relationship results**