How Much Do You Have to Withdraw from Your 401(k) at Age 72?

How Much Do You Have to Withdraw from Your 401(k) at Age 72?

Starting at age 73, if you reached age 72 after December 31, 2022, you must begin taking Required Minimum Distributions (RMDs) from your 401(k). The RMD amount is calculated by dividing your 401(k) balance as of December 31 of the previous year by the IRS life expectancy factor for your age. For instance, if your balance is $150,000 and your life expectancy factor is 25.6, your RMD would be $5,859.38.

What Happens if You Miss Your RMD Deadline?

Missing your RMD deadline incurs a 25% IRS penalty on the amount not withdrawn. This can be reduced to 10% if you correct the missed RMD within two years. To avoid penalties, it’s essential to:

• Mark Important Dates: Keep track of all RMD deadlines.
• Set Up Automatic Withdrawals: Many institutions offer automatic RMD withdrawals.

 

How to Calculate Your Required Minimum Distribution (RMD)

Follow these steps to calculate your RMD:

1. Find Your Balance: Look at your 401(k) balance as of December 31 of the previous year.
2. Use the IRS Life Expectancy Factor: Identify the IRS life expectancy factor for your age.
3. Divide the Balance by the Factor: Calculate your RMD by dividing your balance by this factor.

 

Tips to Avoid RMD Penalties

Here’s how to ensure you avoid penalties:

• Plan Ahead: Your first RMD is due by April 1 of the year after you turn 72. Future RMDs are due by December 31 each year.
• Automate Withdrawals: Set up automatic withdrawals so you never miss a deadline.
• Consult a Financial Advisor: Work with a professional, such as Dimov CPA, to ensure compliance and optimize your tax strategy.

 

Key Changes for 2024 and Beyond

• Roth 401(k) Accounts: Starting in 2024, Roth 401(k) accounts are no longer subject to RMDs while the owner is alive.
• Age Requirement Adjustments: If you turned 72 after December 31, 2022, your first RMD is required at age 73.

 

401(K)

Dimov CPA offers services to ensure you withdraw the correct amount from your 401(k) to avoid penalties, minimize taxes, and manage multiple accounts effectively.