By Sarah Brenner, JD
Director of Retirement Education
The holidays are upon us. There is shopping to do, gifts to wrap, and parties to attend. Amidst the hustle and bustle of the season, you may be forgiven if your retirement account is not at the top of your mind. However, for some retirement account owners and beneficiaries, a very important deadline is looming. December 31 is the deadline to take 2024 required minimum distributions (RMDs) for many individuals.
Retirement Account Owners
Which IRA owners must take an RMD for 2024? If you have a traditional, SEP, or SIMPLE IRA and you are age 74 or older in 2024, you must take an RMD by the end of this year. Also, if you are age 74 or older and have funds in an employer plan such as a 401(k) and you are not eligible to take advantage of the “still-working” exception, you must take a 2024 RMD.
If you have reached age 73 in 2024, you catch a break. You do not need to take your 2024 RMD until April 1, 2025. However, if you wait until next year to take your 2024 RMD, you will need to take two RMDs in 2025 because you are required to take your 2025 RMD by December 31, 2025.
What if you have a Roth account? You are in luck! You are never required to take RMDs from your Roth account in your lifetime.
Retirement Account Beneficiaries
Many retirement account beneficiaries need to take their 2024 RMD by December 31. If you inherited a retirement account before 2020 and you are using the stretch provision under the old rules, you must take your 2024 RMD by the end of the year. Also, if you inherited an account in 2020 or later and you are an eligible designated beneficiary (EDB), you must take an RMD by the end of 2024.
Although Roth accounts are not subject to an RMD requirement while the owner is alive, annual RMDs do apply to Roth beneficiaries who inherited before 2020 and to Roth IRA EDBs who inherited in 2020 or later and chose the stretch option.
Beneficiaries who are subject to both the 10-year rule under the SECURE Act and the final RMD regulations requirement that annual RMDs must be taken during it do not have to take an RMD for 2024. Due to all the confusion over these rules, the IRS has again waived the RMD requirement within the 10-year period. This waiver only applies to this specific group of beneficiaries and only applies for 2024. Going forward, beginning next year, if you are in this situation, you must take those annual RMDs during the 10-year period.
Don’t Delay
You may be thinking it is still early in December, so I have plenty of time to take my 2024 RMD. Do not delay! Many financial organizations have cutoff dates for processing transactions for 2024 that are much earlier than December 31. Add in end of the year staff vacations and waiting until the last minute to take your 2024 RMD is a recipe for trouble. Failing to take your RMD will result in a 25% penalty. Get it done now and enjoy the holidays!
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
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