The IRS requires individuals aged 73 and older to take Required Minimum Distributions (RMDs) from their retirement accounts each year. The amount of the RMD depends on the account balance and the account holder’s age. For someone with $250,000 in their retirement account, the RMD percentages and amounts would be:
At age 73: 3.77% of the account balance, or $9,433.96
At age 75: 4.06%, or $10,162.60
At age 80: 4.95%, or $12,376.24
At age 85: 6.25%, or $15,625.00
At age 90: 8.20%, or $20,491.80
At age 100: 15.63%, or $39,062.50
At age 120 or older: 50%, or $125,000.00
These RMDs are considered ordinary income and are taxable.
Taking the required distributions could push some retirees into a higher tax bracket. To calculate the specific RMD amount, account holders can use the IRS RMD worksheets. Most brokerage firms and IRA custodians also provide the exact account value at the end of the previous year, which is used as the basis for the RMD calculation.
RMD guidelines for retirees over 73
RMDs do not have to be taken from each individual retirement account. As long as the total distribution meets the required amount, it can be withdrawn from the accounts in any combination.
The deadline for taking RMDs is December 31st each year. However, for the first RMD, which is required the year an individual turns 73, the deadline is extended to April 1st of the following year. Roth IRA accounts are not subject to RMD rules, and distributions from Roth accounts are generally not taxable.
Understanding and following the RMD requirements is essential to avoid financial penalties and ensure compliance with IRS regulations. Consulting with a financial advisor can help navigate these rules effectively as part of a comprehensive retirement income strategy.
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