Required minimum distributions
The IRS generally requires that you regularly withdraw the tax-deferred money that you’ve accumulated in your non-Roth retirement accounts when you reach age 73. RMDs, which are based on your life expectancy and account balances, are designed to help you gradually pay the taxes you owe on those assets.
When do RMDs start?
You are required to begin taking RMDs from your IRA account no later than April 1 of the year following the year you turn 73. RMDs from your employer plan should begin no later than April 1 following the end of the calendar year in which you turn 73 or retire, whichever is later. However, if you are a 5% owner of the business sponsoring the retirement plan, you must begin taking your RMD when you turn 73, whether or not you are retired.
Can a combined amount be taken from one account if I have multiple retirement accounts?
If you own more than one IRA, you can withdraw your RMD from each account, or you can combine your RMDs and withdraw the total from just one. The same is also true for 403(b) accounts. However, RMDs from 401(k), 457, money purchase and profit-sharing accounts must be taken separately.
How can I meet RMD requirements and still continue to save?
Of course, you can always withdraw more than the RMD, but you may want to consider leaving as much money as possible in your account(s) so your remaining savings have the opportunity to continue growing.
If you want to avoid taking RMDs, you can roll some or all of your non-Roth account(s) into a Roth IRA, which is not subject to RMDs during your lifetime.
You also have the option to reinvest RMDs taken from non-Roth account(s) into a non-retirement account. Moving money from a retirement account to a non-retirement account is a taxable transaction, so you’ll have to pay income tax withholding on your distribution.
Need more information or advice?
There’s much to consider when it comes to planning what to do with your retirement savings. It’s important to work closely with your tax and financial professionals to make sure you make the right decisions for your situation.
The SECURE 2.0 Act increased the age when RMDs must begin from 72 to 73, effective for individuals turning 72 on or after January 1, 2023. If you reached age 72 before this date, you are still required to take RMDs.