What You Should Know About Required Minimum Distributions (RMDs)
What are RMDs? At some point, the government wants you to start spending your tax-sheltered retirement savings, or at least pay taxes on the income. That’s why it requires you to withdraw minimum payments annually from your traditional IRAs and employer-sponsored retirement plans after you reach a certain age. These are referred to as RMDs or required minimum distributions. Congress has passed significant changes related to these distributions in what’s known as the SECURE Act and its successor, SECURE Act 2.0. This legislation modifies several rules related to distributions from retirement accounts. When must RMDs be taken? The new rules now extend RMD age beyond the previous age of 72. If you were born between 1951-1959, you can now wait until age 73. If you were born after that, it’s age 75. If you fail to take your RMD, the penalty has been reduced to 25% (from 50%) of the amount that should have been withdrawn. The IRS may reduce your penalty further to 10% if you fix the error within a prescribed correction window. Your first RMD must be taken by April 1st of the year you reach RMD age. Subsequent RMDs must be taken by December 31st each