Salt Lake City Office
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Once you reach age 72, the IRS requires you to take required minimum distributions or RMD’s. An RMD is an annual amount the IRS requires you to withdraw from your retirement accounts – whether you need the money or not. Generally, anyone 72 with a traditional retirement savings plan is required by the IRS to take RMDs and pay taxes on them annually. Here are some of the basic facts to know:
Deadline: The deadline for RMD’s is December 31 of the year. For those that turn 72 that year, first distributions can be delayed until April 1st.
Penalty: Failing to take RMDs on time or in the required amount will result in a 50% tax penalty.
Taxes: RMD’s are taxed as ordinary income at your personal federal tax rate. State tax may apply.
Reinvest: You can either use funds for living expenses or reinvest if not immediately needed.
You can review the retirement plan and IRA required minimum distributions on the IRS help page. You may be charged a stiff penalty if you don’t take them… so make sure you do!
It's important to note that 2019’s SECURE Act changed the long-standing RMD rules. Now, if you reach age 72 in 2020 or later, you must take your first RMD by April 1 of the year after you turn 72 years old. Click here to learn more about the changes in the SECURE Act.