Required minimum distributions – or RMDs – aren’t voluntary. You have to take RMDs after age 72 if you want to stay in compliance with the IRS…and avoid paying penalties.

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As the year 2022 approaches, retirees and anyone with retirement accounts should be aware of the updated rules for Required Minimum Distributions (RMDs). These rules govern the minimum amount of money that must be withdrawn from certain tax-advantaged retirement accounts each year once the account holder reaches a certain age.

For the year 2022, the rules for RMDs remain largely unchanged from previous years. The age at which RMDs must begin is still 72 for those born after June 30, 1949. For those born before that date, the age remains 70 ½. This means that if you turn 72 in 2022, you will need to start taking RMDs from your retirement accounts.

The amount of the RMD is calculated based on the balance of your retirement accounts at the end of the previous year and your life expectancy according to IRS tables. Failing to take the full amount of your RMD by the deadline can result in a hefty penalty – 50% of the amount that should have been withdrawn.

It’s important to note that RMDs are required for traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, and other defined contribution plans. Roth IRAs do not require RMDs during the account holder’s lifetime.

If you have multiple retirement accounts, you can choose to take the RMD amount from one account or a combination of accounts. Make sure to calculate the total RMD amount accurately to avoid any penalties.

As the new year approaches, it’s a good idea to review your retirement accounts and make sure you are prepared to take your RMDs on time. Consulting with a financial advisor can help ensure you are meeting all the necessary requirements and maximizing the benefits of your retirement savings. Stay informed about any changes to the rules for RMDs in future years to avoid any surprises and penalties.