What are Required Minimum Distributions (RMDs) for retirement accounts?

Updated February 8, 2024  |   Published December 4, 2023

Once you officially retire, you will want to start withdrawing the funds in your retirement accounts. If you want to wait to withdraw or if you continue working after the current retirement age, it’s important to realize that there is a limit to how long you can leave funds in certain retirement accounts. In fact, the IRS has Required Minimum Distribution rules that say you have to start taking the money out at age 73 (formerly age 70 ½ and 72*)[accurate as of April 20, 2023].

If you choose not to withdraw it all, then you must take out a minimum amount of funds each year. The IRS uses a “Uniform Lifetime Table” along with your previous end-of-year balance to calculate what your minimum would be. These rules apply to a handful of different retirement account types. Failure to withdraw your RMD could result in an IRS penalty.

 

What retirement account types do RMDs apply to?

According to the IRS, RMDs apply to these plan owners and their beneficiaries.

  • traditional IRAs

  • SEP IRAs

  • SIMPLE IRAs

  • 401(k) plans

  • 403(b) plans

  • 457(b) plans

  • profit sharing plans

  • other defined contribution plans

  • Roth IRA beneficiaries

 

IRAs and RMDs

Webster First offers Traditional and Roth IRA certificates, as well as Spousal IRA certificates. RMD rules only apply to owners of traditional IRAs and the beneficiaries of Roth IRAs. There are no RMDs for Roth IRAs during the original owner’s lifetime. At this time, the IRS requires that you take your first RMD by April 1st of the year following the year you turn 73. The deadline for all other annual RMDs is December 31st.

If you are a beneficiary or inherited an IRA from someone who passed away, different RMDs apply. Likewise, a different table is used to calculate them. Please visit the official IRS website for the most accurate and up to date information about retirement accounts, beneficiaries and Required Minimum Distributions.

 

*Effective 1/1/2023 the RMD age was changed to 73 and on 1/2/2033 the age will change to 75. Anyone born before 1/1/1951 has already started taking their RMD, so this change does not affect them and they must continue to take their annual RMD. Individuals born between 1/1/1951-12/31/1959 will begin at age 73. Lastly, anyone born after 1/1/1960 will have their RMDs begin at age 75.