WHAT ARE SOME HOT TIPS FOR REQUIRED MINIMUM DISTRIBUTIONS FROM IRAS AND 401K?
Plan for IRA and 401K distributions during your lifetime and when you pass. Maximize your gifts to charity in a tax efficient way.
Hello, my name is Alex Anselment, an attorney here at Evans Fox.
In this installation of our monthly video series, we will discuss tips for Required Minimum Distributions, or RMDs, from IRAs and 401(k)s:
Understand the RMD rules: Familiarize yourself with the IRS rules governing RMDs, including the age at which they start – 73 in 2023, but that will increase to 75 by 2033.
Calculate your RMD accurately: Use the IRS Life Expectancy Tables to determine your RMD amount. The calculation is based on your age and account balance.
Know the deadlines: RMDs must be taken by December 31st each year. However, for the first RMD, you have until April 1st of the year following the year you turn the required age to withdraw.
Plan for taxes: RMDs are generally taxable as ordinary income. Consider withholding taxes from your distribution or setting aside money to cover the tax liability.
Be aware of penalties: Failing to take your RMD on time can result in significant IRS penalties, in some cases up to 25% of the amount you should have withdrawn. This penalty can be as low as 10% if the error is timely corrected within two years.
Finally, stay informed: RMD rules change over time, so stay updated with the latest IRS regulations and consult professionals as needed to ensure compliance with current rules. It’s essential to plan ahead and make informed decisions regarding your retirement account withdrawals.
Be on the lookout for our video next month when we discuss how to protect your home from long-term care costs.