Minimum IRA Withdrawal at Age 72
Starting in 2024, if you turned 72 before January 1, 2023, you must begin taking Required Minimum Distributions (RMDs) from your traditional IRAs to avoid penalties. If you reach age 72 after December 31, 2022, your RMD age is now 73. The RMD amount depends on your IRA balance and life expectancy. Failure to take the required withdrawal may result in a 25% penalty on the required amount.
How to Calculate Your RMD
- Determine Your Starting Age:
- Start RMDs at age 72 if you turned 72 before January 1, 2023, or at age 73 if you reach 72 after December 31, 2022.
- Check Account Balance:
- Use the balance of all your traditional IRAs as of December 31 of the previous year.
- Find the Life Expectancy Factor:
- Use the IRS life expectancy table to find the factor corresponding to your age.
- Calculate RMD:
- Divide your account balance by the life expectancy factor to determine the required withdrawal amount.
Avoiding Penalties for Missing Your Minimum IRA Withdrawal
- Mark Important Dates: Your first RMD must be taken by April 1 of the year after reaching the required age (72 or 73). All subsequent RMDs must be taken by December 31 each year.
- Use Automatic Withdrawals: Set up automatic withdrawals to ensure timely compliance.
- Consult a Professional: A tax advisor can help ensure all deadlines and amounts are correct.
Common Mistakes to Avoid
- Missing the RMD Deadline: Ensure you know your required beginning date to avoid penalties.
- Incorrect RMD Calculations: Calculate the RMD for each IRA account separately but remember you can withdraw the total amount from a single account.
Frequently Asked Questions About Minimum IRA Withdrawals
1. What is the Minimum IRA Withdrawal Requirement?
The minimum IRA withdrawal is the required minimum distribution (RMD) mandated by the IRS. The age to start has changed to 73 for those reaching age 72 after December 31, 2022.
2. What Happens if I Don’t Take My Minimum IRA Withdrawal?
Failing to take your RMD may result in a penalty of 25% of the required amount.
3. Can I Withdraw More Than the Required Minimum IRA Withdrawal?
Yes, you can withdraw more than the RMD, but the extra amount will be taxed as ordinary income.
4. Are Roth IRAs Subject to Minimum Withdrawals?
No, Roth IRAs do not have RMDs during the original account holder’s lifetime. Starting in 2024, Roth 401(k) accounts are also not subject to RMDs.
5. When is the Deadline to Take My Minimum IRA Withdrawal?
Your first RMD must be taken by April 1 of the year after you reach the required age (72 or 73), and subsequent RMDs must be taken by December 31 each year.
6. Can I Delay My First Required Minimum Distribution?
Yes, you can delay your first RMD until April 1 of the year after reaching the required age (72 or 73). However, you must take your second RMD by December 31 of that same year, potentially resulting in two taxable distributions in one year.
7. How Do RMDs Affect My Taxes?
RMDs are taxed as ordinary income. They may push you into a higher tax bracket or impact your eligibility for certain tax credits or deductions. Consult a tax advisor to manage the potential tax impact.
8. Can I Combine RMDs from Multiple IRAs?
While you must calculate the RMD separately for each traditional IRA, you are allowed to withdraw the total RMD amount from one or more of your IRAs.
9. Are Inherited IRAs Subject to RMDs?
Yes, beneficiaries of inherited IRAs must generally begin taking RMDs. The rules depend on whether the beneficiary is a spouse or non-spouse and the type of IRA inherited.
10. What Are the Penalties for Incorrectly Calculating My RMD?
If you incorrectly calculate and take less than the required RMD amount, you may be subject to a 25% penalty on the shortfall. Accurate calculation and timely withdrawals are crucial to avoid penalties.
Our Offerings
Managing your minimum IRA withdrawal can be complex, but with Dimov CPA in New York, you can ensure all obligations are met accurately. Our team assists with RMD calculations, optimizes your tax strategy, and prevents penalties, allowing you to enjoy your retirement.
