RMD Mistakes Could Cost You. Know the Rules! Tushaus Wealth Management

Being unaware of RMDs can cause you to lose a chunk of your retirement savings. Taxes on RMDs can be huge if you miss a distribution or are not aware of the rules that surround RMDs.[1] If you’re not sure what an RMD is, or you want to make sure you’ve got your info correct on RMDs, this article is for you.

An RMD is a required minimum distribution–essentially, it is the age at which you must begin withdrawing from your retirement account.[1] If you have an employer-sponsored retirement plan like a 401(k) or a traditional IRA, you may have to deal with RMDs as you get older.

With the Secure Act 2.0, the rules for RMDs were set up so that you must begin taking RMDs at age 73 if you are turning 72 after 2022, and age 75 if you are turning 74 after 2032.[1] And you must take the RMD by April 1st of the year after you turn 72 or 75.[1] All subsequent RMDs must be taken by December 31st of the year they are due.[1]

This can get a bit complicated, so let’s give an example to break down what this means. Let’s say you’re turning 73 in October of 2024, so you must take an RMD for 2024. You actually have until April 1st of 2025 to take your RMD for that year—a little extra time to take your first one. Let’s say you take your RMD for 2024 on April 1st of 2025. You won’t get any tax penalties, and you’ve done everything right. However, you also have to take your 2025 RMD before December 31st! So, you will technically take two RMDs that year – one applying to 2024 and the other for 2025.[1]

Knowing which year to claim your first RMD can be tricky. It might be advantageous to take two RMDs in a single year, or it might be better for you to take your first RMD in its own year instead of waiting. It depends on your specific situation as well as what you plan to do with the money. You should also consider the question of how much to take.

This article also only scratches the surface of RMD rules! There are a lot of other things that go into RMD strategy that our professionals can help you with. If you realize you don’t have a comprehensive strategy and timeline for your RMDs, consider reaching out to one of our professionals today for a complimentary review of your finances.

 

Keep in mind, this article is for informational purposes only and not to be construed as financial or investing advice, nor is it a replacement for real-life advice based on your unique situation. Investing and retirement account rules are constantly changing, and it is recommended that you work with tax and financial professionals who specialize in retirement.Investment Advisory Services are offered through Tushaus Group, LLC, a registered investment adviser.

Tushaus Group, LLC does not provide tax or legal advice.