Recent turmoil in the markets has hit many retirement savers hard as they see their IRA and 401(k) balances rapidly shrinking. For many, the age-old advice to stay the course for the long term and not cash out too soon applies, but for those who are age 73 or older, the rules requiring required minimum distributions (RMDs) present a hurdle.
2025 RMDs
Under current tax rules, IRA owners and many participants in employer plans must start taking RMDs once they reach the year in which they turn age 73. (The first RMD can be delayed until the following April 1, but then you would have two RMDs due in the next year.) Some plan participants can also delay RMDs if they are still working.
To calculate your 2025 RMD, you divide the December 31, 2024, balance of your account by the factor that corresponds with your age on the IRS Uniform Lifetime Table. Here is the issue: Due to recent market losses, many have seen their account balances decrease sharply from where they were at the end of 2024. This means taking an RMD calculated on a much bigger balance from a significantly smaller account.
RMD Waivers
Will retirement savings get any relief from this 2025 RMD hit?
In the past, when the markets have experienced very severe declines, Congress has stepped in and waived RMDs for the year. We saw this happen in 2009 during the Great Recession and then again in 2020 due to the global pandemic. As of right now, it is too early to tell if similar relief will be available in 2025, but the fact that this happened before is worth noting.
In these times of market volatility, retirement savers may want to delay 2025 RMDs until later in the year. Retirement account balances may have recovered by then, or Congress may act and grant some relief, as they have done before.
Stay Tuned
At the Slott Report, we have heard from many IRA owners and plan participants who are concerned about their 2025 RMDs in these times of market losses. We will be following any developments on this issue closely. Stay tuned for updates!
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.
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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