What’s an RMD?
RMDs are required minimum distributions investors must take every year from their retirement savings accounts, including traditional IRAs, and employer-sponsored plans such as 401(k)s, and Roth 401(k)s, starting at age 72.
If you’re turning 72 this year and taking your first RMD, you have until April 1, 2022, to do so. For each subsequent year, your RMD must be taken by December 31. Keep in mind, if you delay your initial RMD until April 1, you’ll be responsible for 2 withdrawals that year (one by April 1 and one by December 31), which could result in a larger tax liability.
If you’re older than 72, you must take your RMD by December 31 each year.
Note: Roth IRAs aren’t subject to RMDs.
What do I do?
If you have satisfied your RMD requirement for this year, no further action is required for this year.
If you do not take your RMD by the appropriate date, the IRS may impose a 50% excise penalty tax on the difference between your RMD amount and the amount you withdraw. For example, if your RMD amount is $10,000 for a given year and you make no withdrawals, you could owe the IRS $5,000 in penalties.
You must calculate your RMD separately for each IRA you own. The RMD may be satisfied from this IRA or any other existing IRAs. Once you reach RMD age, your financial professional will work with the broker/dealer to automatically calculate your annual distribution amount for any traditional IRAs and Individual 401(k)s that you own.
What if I don’t need the RMD assets?
RMDs are designed to spread out your retirement savings and related taxes over your lifetime. If you don’t depend on the money to satisfy your spending needs, you may want to consider:
Reinvesting your distributions in a taxable account to take advantage of continued growth. You can then add beneficiaries to that account without passing along future RMDs to them.
Gifting up to $100,000 annually to a qualified charity. Generally, qualified charitable distributions, or QCDs, aren’t subject to ordinary federal income taxes. As a result, they’re excluded from your taxable income.
How do I take my distributions?
A distribution from your account can be made by contacting your financial professional to request a one-time distribution or to establish a periodic distribution plan, which will make regular distributions from your account in a manner, frequency, and amount chosen by you.
You must have sufficient funds available in your account to carry out the appropriate distribution amount.
Contact our office at (800) 522-8727 or (405) 478-7700 or reply to your advisor if you have questions.