How do required minimum distributions work? What is the required
minimum distribution age? Should you take RMD from traditional iras, simple iras, sep iras, pre-tax 401k, or roth 401k?
In today’s video, we are going to talk about Required Minimum
Distributions.
What they are? How they work? What can you do with
them? At the end of this video, you’ll get to know which RMD Strategy
is best for you and how to get the maximum out of your Tax Planning in
retirement.
Learn the tips & strategies to create your secure retirement.
⏰ TIMESTAMPS
00:00 – Introduction
1:03 – RMD Age
2:03 – Understanding Your RMD
4:47 – How Are RMDs Taxed?
6:11 – 401(k)s, 403(b)s, etc..
6:58 – Inherited IRAs! (Yes, RMDs apply!)
8:31 – RMD Calculators
9:51 – Inherited Roth IRA
11:51 – Tax Planning
14:31 – Eligible Designated Beneficiary
16:58 – Charitable Giving Strategies
18:45 – RMD Strategy (looking forward)
19:39 – Resources & More!
20:08 – Work With Us
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As you approach retirement, it’s important to understand the rules and regulations for Required Minimum Distributions (RMDs). These are minimum amounts that you must withdraw from your retirement accounts, such as 401(k) plans, traditional IRAs, and other tax-deferred accounts, once you reach age 70½.
Here’s a guide to understanding RMDs, including when you need to take them, how much you need to withdraw, and what happens if you don’t take them on time.
When Must You Take RMDs?
The IRS requires that you start taking RMDs from your retirement accounts no later than April 1 of the year following the year in which you turn 70½. For example, if you turn 70½ in 2020, you must take your first RMD by April 1, 2021. After that, RMDs must be taken by December 31 of each year.
However, if you have a 401(k) plan and you’re still employed at age 70½ or older, you may be able to delay taking RMDs until you retire. This exception only applies if you’re still working for the employer who sponsors the plan and you don’t own 5% or more of the company.
How Much Do You Need to Withdraw?
The amount you need to withdraw for your RMD depends on several factors, including the balance in your retirement account and your life expectancy.
To calculate your RMD, you’ll need to use the IRS Uniform Lifetime Table, which estimates how many years you have left to live based on your age. The table provides a factor that you’ll use to calculate your RMD for the year.
For example, let’s say you’re 72 years old and your retirement account balance at the end of the previous year was $200,000. According to the Uniform Lifetime Table, you have a life expectancy of 25.6 years. Dividing your account balance by the distribution period, your RMD for the year would be $7,812.50.
What Happens If You Don’t Take Your RMDs?
If you don’t take your RMDs on time, you could face steep penalties. The IRS charges a 50% penalty on the amount you should have withdrawn but didn’t.
For example, if your RMD for the year was $10,000 and you didn’t take it, you could owe a penalty of $5,000 in addition to income taxes on the amount you withdraw later.
It’s important to remember that you’re responsible for taking your RMDs. retirement account custodians are required to calculate the RMD amount for you, but it’s up to you to take the withdrawal.
Conclusion
Understanding RMDs is essential for any retiree who has a tax-deferred retirement account. Make sure to calculate your RMDs each year so you don’t miss the deadline and face penalties. Consider working with a financial professional to help you understand and plan for your RMDs and retirement needs.
Very good explanation.
Studying for my SIE, Series 7 top off etc. and I wanted to tell you this is some pretty great content. You framed this concentration very well and learned a great deal. Thanks!
Thank you very thorough. But one aspect of RMD that didn't get covered was how to aggregate the RMD requirement from one account rather than take an RMD from every individual account. My question: can Roth IRA(s) be aggregated with Traditional IRA(s) and make a single distribution from a Roth IRA? I assume not, since that would seem to skirt the IRS intent to reclaim taxes on the original contributions to the Traditional IRA(s). But I haven't found that question specifically addressed. Thank you.
Beneficiary alert: If you inherit an IRA, DO NOT take immediate possession of it (and maybe put it in a bank or brokerage account.) If you do, you'll have to pay the entire income tax on the entire IRA all at once. Instead, you want your custodian (ie. bank, brokerage, etc.) to TRANSFER the entire beneficiary IRA to you in your name. This way you put yourself in a position to follow the rules covered in this video.
Excellent explaining of RMD. Is married filing separately viewed by IRS as single when comes to RMD? Is it correct that all taxable income social security, IRA, and individual taxable account COMBINED calculated against expected life expectancy? Appreciate it much.
Very helpful. Who knew that saving money would be so costly? I gave most of my distribution to charities since Covid eliminated much of the travel on which we used to spend the money. They need the help, and the government doesn't get the money…. win,win!
So if your birthday is later (at end of the year) you must use your age that you will be at the end of the year for the calculation ? Not your present age?
Very informative.clearly stated.
What if I have to sell stock that I took a loss on in order to take the RMD?
What happens if my life insurance company annuity fails to take out my December 2021-requested withdrawal until January 2022 ?
Where do I find that RMD Table you showed us in your video, please ?? I assume it was an IRS Table, but I do not know how to get one.
Please advise.. Thank you for this wonderful video ! I have learned so much that I needed to know !
Fran Danco
The best explanation I ever heard. I wish I knew this channel before. So far every financial advisor I had wanted to line their own pockets first. Thanks.
Please tell me why i should have a 401k. Remember all those years of getting tax breaks for contributing to your retirement? That's all deferred taxes. Now is the time pay. All these IRS rules is why don't have one. I have a stock portfolio of dividend paying stocks. It puts me in the 10-15% tax bracket.
My wife bought an annuity almost 35 years ago using money from a divorce settlement. Sure wish the company had explained RMD's way back then! We'd be ready now. She will turn 72 this year!! I think this is gonna be a sucky year for taxes.
If I give my church $5,000 a year via weekly contributions, instead I could take $5,000 from RMD and not pay taxes. Am I correct in my thinking?
Well spoken instruction!
I have investment accounts with two different firms for my IRA's. After I calculate my RMD for the total of the two accounts, can I take the entire RMD amount from one of the accounts or must I take the appropriate amount from each account?
Thanks for providing important information. I found it very helpful. I would like to suggest that you write inserted texts in small letters. Capital letter texts are hard to read. Research has shown that all capital letters have a readability issue for many people. Thanks for your consideration.
Thanks for the video, some good info. Question, my wife is older and already taking the RMD from her retirement account. I'm not 72 yet. If she passes away do I have to keep taking the RMD or can I stop it until I'm 72?
Is there a best strategy of when in the first year of RMD required to take the distribution? Next year for me.
Thanks so much for sharing your knowledge! The video is loaded with useful information. I just learned about things that apply to my situation watching your video. Just subscribed.
Great video, thank you. The IRS websites are overwhealming with info., and calling them is a waste of time… on hold forever. Please help me with these 2 questions. 1. You said that Roth IRA is the same as the traditional, must pay IRS taxes AND income taxes on 1040, right? 2. I turned 72 this year, am a first timer. Is it OK to take out more than the required minimum, let's say an extra 10K… am really broke after Christmas and all this COVID affair. Thank you again. Happy New Year. Keep us posted, you are a wonderful communicator, a real gift for us…
Any previous distributions prior to age 72 do not count or benefit as to RMD's? At age 62 I elected to take small monthly distributions and not apply for Social Security. My plan is to wait till or closer to full retirement age 66 10 months, then turn off distributions until required at age 72.
Given my SS and pension , I'll be taking enough to run out by time b4 I'm 90 if I make it .
Ditto earlier comments on your clear and informative explanation. Thank you very much for taking time to educate the unwashed masses…
Thank you; very well done. Question 1: I am married and 18 years older than my wife and file a joint return. In terms of the age used in the calculation of my RMD does my wife lower age affect the number of years used in the calculation? How do I find that out? Question 2: I made after tax contributions to my IRA over the years. I presume I do not have to pay tax on that amount. How is that taken into account? Again, thanks and I look forward to other of your videos.