Did You Know?

Now
Introducing…

Now Introducing “Did You Know?”, an educational resource designed to inform YOU about recent and relevant political issues.

This page will be regularly updated with helpful information relating to Healthcare, Social Security, Retirement, and more!

Click on any of the tabs below to learn about what topics and issues are currently trending on Capitol Hill!

RMDs, or required minimum distributions, are an amount an individual must withdraw from their traditional IRAs (individual retirement accounts), 401(k), 403(b), or SEP-IRAs each year after a specified age. Taxes must be paid on these RMDs when they are withdrawn from traditional retirement accounts. The RMD is calculated on a government formula based on the IRA account balance and an individual’s age in the tax year, or their spouse’s age in certain other situations.

A traditional IRA allows individuals the opportunity to defer taxes on otherwise taxable income and its earnings up to specified amounts each year. However, RMDs are designed to draw down such accounts and collect the taxes within the individual’s life expectancy. In addition, individuals may withdraw more than their RMDs and pay the taxes. RMDs do not apply to Roth IRAs. On Roth IRAs, income taxes have already been paid as opposed to traditional IRAs, on which income taxes on contributions are deferred until the funds are withdrawn.

Thus far, RMDs have been required on traditional IRAs for individuals 70 ½ years old or older or face a substantial tax penalty up to 50 percent of the prescribed RMD amount, plus taxes at their taxation rate. Beginning in 2025, significant changes to these rules are taking place to include the following:

  • Required start age for RMDs has been increased to 73 for individuals who will turn 73 after December 31, 2022, or increased to 75 for those who will turn 74 after December 31, 2032.
  • IRAs inherited from other-than-spouses must be depleted via annual withdrawals within ten years, up from five years. This requirement was waived for years 2021-2024.
  • Regardless of age, individuals must continue to withdraw RMDs on an account inherited from another individual who was already withdrawing their RMD.
  • Roth 401(k)s will no longer require RMDs effective 2024.
  • The penalty for not withdrawing RMDs is reduced from 50 to 25 percent, or lower in specified cases in which the tax payer seeks to correct their problem within a specified time, normally two years.
  • Up to $108,000 may be donated to a qualified charitable entity from an individual IRA or other qualified retirement account per year and count as a RMD, without counting as income for taxation purposes and without itemizing tax deductions.

This information is for educational purposes only and you should seek financial advice from a licensed financial professional based on your unique situation before making investment decisions.

This page is regularly updated, so check back later for more Did You Know? topics and issues!