The IRS Wants Its Money Back
For decades, your Traditional 401(k) and IRA grew tax-deferred. Now, the government mandates you start withdrawing (and paying taxes on) that money. This is the Required Minimum Distribution (RMD).
SECURE Act 2.0 Changes
The rules have changed dramatically:
- Born 1950 or earlier: RMDs started at 72.
- Born 1951-1959: RMDs start at Age 73.
- Born 1960 or later: RMDs start at Age 75.
The New Penalty
If you fail to take your RMD, the penalty is severe. It used to be 50%. The SECURE Act 2.0 reduced it to 25%. If you correct the error promptly (usually within 2 years), it is further reduced to 10%.
Qualified Charitable Distributions (QCDs)
If you don't need the money and want to avoid the taxes, you can send up to $105,000 (indexed for inflation) directly from your IRA to a Charity. This counts as your RMD but is 100% tax-free. It never hits your taxable income, which can help keep your Medicare premiums low (IRMAA).
Inherited IRA Rules
If you inherit a Traditional IRA, you must take RMDs (based on your own life expectancy) AND empty the account within 10 years (Secure Act). This prevents "Stretch IRAs" from passing tax-deferred wealth across generations forever.
Still Working Exception
If you are still working at age 75, you usually do NOT have to take RMDs from your *current* 401(k). However, you must still take them from old 401(k)s and all IRAs.
Roth 401(k) RMDs Eliminated
Before 2024, Roth 401(k)s had RMDs (unlike Roth IRAs). The SECURE Act 2.0 fixed this. Starting in 2024, you do **NOT** have to take RMDs from a Roth 401(k). You can let it grow tax-free forever, just like a Roth IRA.
FAQs
- Do Roth IRAs have RMDs?
- No! Roth IRAs have NO RMD requirements during your lifetime. You can leave the money in there growing tax-free until you are 100.
- What if I miss the deadline?
- You must file IRS Form 5329. If you show "reasonable cause" and correct the error immediately, the IRS often waives the penalty completely. Do not ignore it.
- Can I aggregate RMDs?
- Yes for IRAs (add them all up and take it from one). No for 401(k)s (must calculate and take from each separately).
- What is the uniform lifetime table?
- It's an actuarial table the IRS uses to guess when you'll die. It assumes you withdraw slowly enough to never run out of money until age 120.