What is an RMD?
RMD is a Required Minimum Distribution and is to make sure taxes are collected on the retirement funds you have been saving on a tax-deferred basis.
Which Accounts Are Subject to RMDs?
Traditional tax-deferred accounts; traditional IRAs, traditional 401Ks, SEP IRAs, 403bs, 457 government-sponsored deferred comp plans
Roth 401Ks and Roth IRAs are NOT subject to RMDs.
What Is the Age For RMDs?
The current age requirement is 73, and your first RMD MUST be taken by April 1 of the year after you turn 73. Subsequent distributions must be taken by 12/31 each year. This requirement will remain until 2033 and is then set to change to age 75.
Do I have to take my RMD as a lump-sum?
No. While an annual withdrawal is an option, it is not the only option. Investors can also choose to take monthly or quarterly distributions. It really depends on an individual's income needs, tax scenarios, and overall investment strategy so certainly give your SWM advisor a call to help make the best decision for you.
Can I lower my RMDs by taking them when the market is down?
While this would seem to make sense in theory, unfortunately it does not work in actuality. Your RMD amount is based on your account balance at the end of the previous year, so current market conditions do not have an impact.
Do I owe taxes on my RMDs?
The simple answer is yes, RMDs are treated as ordinary income and taxed at your ordinary income rate. BUT, there are strategies available to reduce that tax burden, including a Qualified Charitable Distribution (QDC). You must be at least age 70 ½ and the distribution MUST be made directly from your IRA to a qualified charitable organization. The amount of the distribution to the qualified charity is NOT included in your taxable income and no charitable deduction on your taxes may be taken for this distribution(s). Each person that meets the above qualifications may contribute up to $108,000 in 2025, even if above their RMD, from their tax-deferred retirement account. This amount will increase each year.