All articles tagged with #rmds
Retirees facing market volatility should carefully manage required minimum distributions (RMDs) by considering strategies like holding cash reserves, timing withdrawals, and reallocating assets to lower-risk investments to avoid selling in a downturn and to optimize retirement income amid economic uncertainty.
The IRS is reminding individuals aged 73 and older to withdraw their required minimum distributions (RMDs) from retirement accounts like IRAs before the end of the year, as mandated by the SECURE 2.0 Act. This legislation has increased the age for mandatory withdrawals from 70-and-a-half to 73, with a future increase to 75 by 2033. While delaying RMDs can help optimize Social Security benefits, it may also result in larger withdrawals due to account growth. Roth IRAs are exempt from RMDs, and workplace retirement plans may allow delays until retirement, except for significant business owners.
Many retirees are only taking their required minimum distributions (RMDs) from retirement accounts out of fear of outliving their assets, which can lead to significant lost income. This cautious approach, part of the 'retirement consumption paradox,' often results in large account balances and unnecessary withdrawals later in life. Retirees are encouraged to explore alternative strategies like qualified charitable distributions or rolling funds into a Roth account to optimize their income.
Retirees who turned 72 in 2022 have until April 1 to make their first mandatory retirement plan withdrawal, known as required minimum distributions (RMDs), or face a 25% tax penalty. RMDs apply to pre-tax and Roth 401(k)s, most individual retirement accounts, and other workplace plans. Although Secure 2.0 raised the beginning age for RMDs to 73 starting in 2023, retirees who turned 72 in 2022 still must withdraw the funds by April 1 to avoid the penalty. The penalty for missed RMDs was reduced to 25% from 50% starting in 2023, with the possibility of reducing it further to 10% if you take your missed RMD during the "correction window."