The required minimum distribution (RMD) rules can be tricky. We receive many questions as to how much to take and when to take the distribution. The first required minimum distribution must be taken by April 1st of the year AFTER you tune age 73. Technically, the distribution is due December 31st of the year in which you turn age 73, but the IRS gives you a 90-day grace period so that it is due April 1st after you turn age 73. Keep in mind, that you would still have to make a second distribution the year in which you made the first distribution, assuming you waited until April 1st to make the first distribution. This might put you into a higher tax bracket and is certainly something to consider.
A lot of clients ask us which IRA the distribution needs to be made from. The IRS doesn’t care from which IRA you make the distribution. They look at ALL your IRAs as 1 IRA and the distribution can be made from all IRAs or 1 or more of your IRAs.
As an example: Let’s assume you turned 73 this year, in 2023. Your first required distribution would be due December 31st, 2023. You can delay the first distribution until April 1st, 2024. The amount of the distribution would be based on the value of all your IRAs on December 31st, 2022. The second distribution would be due December 31st, 2024, and based on the value of all IRAs on December 31st, 2023. The exact amount of the distribution will vary as it depends on the December 31st value from the previous year and your age the following December 31st of the current year.
The rules on distributions have changed over the last few years and can be complicated. You don’t want to make a mistake. If you forget to take the RMD for a given year, there is a 25% penalty (down from 50%) on what should have been taken, PLUS the Federal income tax due on the distribution.
Please call us should you wish to discuss this further as we are happy and prepared to help you.