En español | People have a love-hate relationship with taxes. OK, it's mostly hate. And one of the things people — in this case, mostly retirees — really hate is taking required minimum distributions (RMDs) from their retirement savings accounts.
Why the hate? “They don’t want to be forced to take money out of their IRAs when they don’t need it,” IRA expert Ed Slott says. “They think, ‘I earned this money, and I want to use it when I want to use it.’ ” Even worse, RMDs are treated as taxable income, which can move them into a higher tax bracket. “It makes them extra-double angry,” Slott says.
The IRS feels differently. Though making pretax contributions to a tax-deferred retirement account such as a traditional IRA or 401(k) is a great way to build a nest egg, you can’t defer taxes forever. When you do finally start taking RMDs, Uncle Sam will finally start collecting federal income taxes on your withdrawals.
New rules delay RMDs until age 73
Under current rules, you must take your first required minimum distribution by April 1 of the year after you turn 73. If you hit 73 on June 30, 2023, for example, you’re going to have to yank some cash out of your IRA by April 1, 2024.
The extended April 1 deadline only applies to your first RMD. All subsequent RMDs are due by Dec. 31 of each year for that year. Keep in mind that means you could take two distributions in the first year that your RMDs kick in — one on April 1 for the prior year and one on Dec. 31 of that same year.