2024 Guide for Required Minimum Distributions

As we enter the final months of 2024, it is crucial to keep in mind deadlines and penalties related to Required Minimum Distributions (RMDs). Final regulations for RMDs were issued in July by the IRS which incorporate rules from the SECURE and SECURE 2.0 Acts. Below are some key guidelines to consider:

• RMDs begin at age 73 and generally must be completed by December 31.
• The Qualified Charitable Distribution (QCD) limit increased in 2024.
• Taxes and Medicare costs may be impacted by RMDs.
• Missing withdrawals can result in penalties.
• Owners of Roth accounts and designated Roth accounts are not subject to RMDs.

• Individuals turning 73 in 2024 can take their RMD by December 31, 2024, or wait until April 1, 2025. Pushing back to April 1 means that you need to take a second RMD by December 31, 2025. This option may also cause the calculated RMD to be higher your second year.
• Individuals born between 1951 and 1959 must begin taking RMDs at age 73, and those born in 1960 or later are able to delay RMDs at age 75.
• In 2033 the RMD age will increase to 75.

• IRA qualified charitable distributions (QCDs) made by account holders aged 70 ½ or older can satisfy an RMD up to $105,000.
• Individuals who are at least 70 ½ can use their QCDs to donate tax-free to eligible charities. It is important to note that donor advised funds can’t accept QCDs.  

• For Medicare part B and D premiums, your payment amount depends on your income. On the other hand, when you start RMDs, your income could also increase and you may have to pay more for Part B and D premiums.
• For most qualified employer retirement plan participants, the year they start taking RMDs is the year they retire, so if that is after age 73, they are able to delay.
• Delaying retirement account distributions to age 73 may lead to a higher income, but this will generally result in a larger tax bill, as well as an increase of pre-tax accounts passed to heirs which could raise taxes for account beneficiaries.
• Those who are at least 59 ½ years of age and own company stock in their qualified employer-sponsored retirement plans, if separated from their employer, may be eligible to implement a net unrealized appreciation as a tax strategy to save money and reduce potential RMDs.

Individuals who do not complete an RMD by the deadline will face a potential 25% tax penalty. The penalty can drop to 10% if the error is corrected within 2 years.

Due to the SECURE 2.0 Act, beginning in 2024 owners of designated Roth accounts (DRAs), including Roth 401(k), Roth 403(b), and Roth 457(b) accounts are not subject to RMDs. Prior to this change, DRA holders had to roll the account into a Roth IRA to skip the RMDs.

As we approach the end of 2024, it’s important to carefully review and plan for Required Minimum Distributions (RMDs) to avoid costly penalties and tax implications. Whether you’re managing deadlines for the first time or considering strategies like qualified charitable distributions (QCDs) to minimize your tax liability, staying informed on these rules is key to maintaining your financial wellbeing. Be mindful of the SECURE and SECURE 2.0 Act updates, as they offer additional flexibility, especially for those with Roth accounts. Proper planning now can help you stay compliant and make the most of your retirement savings.