Just as a lack of financial planning can affect your investment portfolio and your financial future, misunderstanding or a failure to adhere to the rules surrounding required minimum distributions (RMDs) could cost you money in the form of stiff penalties and potential loss of income.
The Basics of RMDs
● An RMD is the minimum amount you must withdraw every year, after you turn 72, from your qualified tax-deferred retirement accounts, which includes employer-sponsored retirement plans, traditional IRAs, SEP-IRAs, and SIMPLE IRAs. Since an RMD is the required minimum amount, you can always withdraw more than that amount.
● RMDs are in place so the Internal Revenue Service can tax income that has previously been held in tax-deferred accounts.
Important things you should know about RMDs
To help preserve your hard-earned savings, let’s take a closer look at a few important things you should know about these pesky RMDs.
1. Know when you are required to start taking your RMDs – the starting age rule has changed!
Your friend, who started taking their RMD a few years ago, may have told you that you must start taking RMDs when you turn 70½. Careful—the rules have changed! The long-standing RMD starting age of 70½ was adjusted to 72 with legislation passed in 2019. (Click Here to Read the Full Article)