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One of the biggest benefits of traditional IRAs and 401(k)s is that they let you save and invest pretax money for retirement. But you can’t keep that money stashed and those taxes deferred forever. By law, you’re obligated to make annual withdrawals once you reach a certain age and to pay federal taxes on that income at your regular rate.
The SECURE 2.0 Act of 2022, a wide-ranging package of federal provisions designed to foster greater retirement saving, changed some of the regulations surrounding those withdrawals, called required minimum distributions (RMDs), including when you must begin taking them. If you’re confused about whether the changes affect you, here’s what you need to know.
The RMD minimum age is now 73
Owners of traditional IRAs and workplace retirement accounts such as 401(k), 403(b) and 457 plans, SEP IRAs and SIMPLE IRAs must begin making annual withdrawals, at a minimum amount set by the IRS once they reach a certain age. In 2023, that age went up from 72 to 73. (RMDs are not required from Roth IRAs until the owner dies and passes the account to heirs. Starting with the 2024 tax year, the same will hold for Roth workplace plans.)
What hasn’t changed are the RMD deadlines. When you reach the minimum age, you can delay your first mandatory withdrawal until April 1 of the following year. From then on, you must take your annual RMD by Dec. 31.
What does that mean for 2023 RMDs?
Well, if you turned 73 in 2023, that means you turned 72 in 2022 and should have already been making required withdrawals. You had until April 1, 2023, to take your first RMD (for the 2022 tax year), and you must take another (for the 2023 tax year) by New Year’s Eve.
If you turned 72 this year, you have until April 1, 2025, to take your initial RMD — but you may not want to wait.
“I’m not a fan of delaying that first payment because then you have to take two in the following year,” says Judith Leahy, a senior wealth adviser for Citi Personal Wealth Management. Two RMDs in one year could lead to a sizable tax bill, she notes.
If you already were older than 72 at the start of 2023, nothing changes. You still must make your 2023 withdrawal by the end of the year.
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