{"id":12837,"date":"2023-11-20T17:19:01","date_gmt":"2023-11-20T17:19:01","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=12837"},"modified":"2024-01-10T17:17:23","modified_gmt":"2024-01-10T17:17:23","slug":"untangling-the-confusion-around-rmds-required-minimum-distributions","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/untangling-the-confusion-around-rmds-required-minimum-distributions\/","title":{"rendered":"Untangling The Confusion Around RMDs (Required Minimum Distributions)"},"content":{"rendered":"\n

Lydia B. from Hartford, CT asks<\/em>: Hello Mitch, it seems like there have been a lot of rule changes in the retirement planning realm in the past year. Is there anything I need to know about Required Minimum Distributions this year or next? Thank you!<\/p>\n\n\n\n

Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n

Thank you for writing, Lydia. You ask a timely question, given that Required Minimum Distributions (RMDs) for many retirees are due by the end of the year. Still a few weeks left.<\/p>\n\n\n\n

There has historically been quite a bit of confusion around RMDs. For several years, the RMD age was set at 70 \u00bd, which was not the most user-friendly age for something as important as required withdrawals from an IRA. What\u2019s more, people had until April 1 of the year following the year<\/em> they turned 70 \u00bd to take their first RMD, which is far from straightforward.1<\/sup><\/p>\n\n\n\n

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Thankfully, the RMD age changed with the passage of the SECURE Act, and was raised to around 72. But with the recent passage of the SECURE 2.0 Act, the age has moved up to 73 in 2023, and then will go up to 75 in 2033. But let\u2019s focus on the current rule for the current year.<\/p>\n\n\n\n

The easiest way to wrap one\u2019s head around RMD age rules is to focus on the year you were born. If you were born in 1950 or earlier, then the old RMD rules apply to you. If you were born in 1951, then you can use 73 as the age when you need to take RMDs. Since people born in 1951 will turn 73 in 2024, that\u2019s the year when RMDs start \u2013 which also means you have until April 1, 2025 to take your first RMD. Then you\u2019d have until the end of 2025 to take your \u2018second\u2019 RMD, and it goes on from there.<\/p>\n\n\n\n

Another important change from the SECURE 2.0 Act is the penalties for missed or \u2018under-withdrawn\u2019 RMDs. In the past, the IRS would penalize people 50% for missing an RMD, which was seen as extremely punitive. It\u2019s been reported that the IRS rarely enforced such a harsh penalty. With new provisions in SECURE 2.0, this penalty has been reduced to 25%. Furthermore, if the individual corrects the shortfall within a specified “correction window,” the penalty can be further reduced to 10%.<\/p>\n\n\n\n

A final change to RMDs from the SECURE 2.0 Act is a new benefit allowing individuals aged 70\u00bd or older to make a one-time gift of up to $50,000 from their Individual Retirement Account (IRA) to a charitable remainder trust (CRT) or a charitable gift annuity.<\/p>\n\n\n\n

A charitable remainder trust is a tax-exempt, irrevocable trust that first disperses income to the beneficiaries of the trust for a specified period of time, and then donates the remainder of the trust to a designated charity. Although the $50,000 one-time gift is not tax-deductible, it does count towards the individual’s Required Minimum Distributions (RMDs) for the year. This may be particularly beneficial in the event it helps the donor avoid being pushed into a higher tax bracket when taking distributions from their IRA.<\/p>\n\n\n\n

There are many options for strategically taking an RMD, so if you have questions about what strategy might work best for your specific financial situation, I\u2019d encourage you to reach out to Zacks Investment Management with questions.<\/p>\n\n\n\n

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You\u2019ll get insight on:<\/p>\n\n\n\n

\u2022 How to overcome investing challenges and take the long view
\u2022 Using a flexible, multi-strategy approach to stay invested in all market conditions
\u2022 Choosing the right investment mix with our top-ranked strategies2
\u2022 Plus, many more ways to help you pursue your retirement, your way<\/p>\n\n\n\n

If you have $500,000 or more to invest and are ready to learn more, click on the link below to get your copy today!<\/p>\n","protected":false},"excerpt":{"rendered":"

RMDs are withdrawals from an IRA that people are generally required to make each year. The rules have recently been updated, so it’s important to learn what’s changed. <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-12837","post","type-post","status-publish","format-standard","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12837","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=12837"}],"version-history":[{"count":2,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12837\/revisions"}],"predecessor-version":[{"id":12839,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12837\/revisions\/12839"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=12837"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=12837"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=12837"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}