May 5, 2023
Few people think about Required Minimum Distributions (RMDs) until they have to.
Required Minimum Distribution (RMD) Requirements
Generally, RMDs are the minimum amount of money that a person must withdraw from a retirement account each year when reaching a certain age. RMD rules generally apply to the following types of tax deferred retirement accounts: 401(k), 403(b), 457(b), IRA, SEP, TSP, and a SIMPLE IRA.
The age that RMDs are required has changed recently.
The SECURE Act of 2019 delayed the RMD requirement age from 70½ to 72 years.
Now the SECURE 2.0 Act of 2022 is once again delaying the RMD age starting this year in 2023, from 72 to 73.
But there’s more. In 2033, the RMD age will increase to age 75.
RMD Calculations
A formula is published by the IRS to calculate an RMD. This formula divides the retirement account balances by a life expectancy factor to determine the RMD. The IRS publishes a chart every year that is used to determine the life expectancy factor.
If there are multiple IRAs, each account must be calculated individually, but the total RMD amount can come from one IRA or a combination of IRAs. For Inherited IRAs and other retirement plans like a 401k or 403b, an RMD must be calculated and withdrawn from each account individually.
Conclusion
This is meant to be only a quick overview of RMDs. Specifics for any client should start with a call to our office to determine when RMDs are required, provide amounts necessary to comply with IRS rules and any options for which accounts need the withdrawals.
Gregory, Gabriella, Brian, Samer, and Chris
Prato Capital Management
Where Integrity Meets Discipline
