Latest news with #RMDs
Yahoo
8 hours ago
- Business
- Yahoo
How Much Is the Required Minimum Distribution (RMD) if You Have $100,000 in Your Retirement Accounts?
Key Points Once you reach the age of 73, the IRS requires you to make minimum annual distributions from non-Roth retirement accounts. You must calculate your own RMD based on the value of your ordinary IRAs as of the end of the previous calendar year. There is some flexibility as to how and when you complete your required minimum distribution, but you'll still want to be smart about utilizing particular options. The $23,760 Social Security bonus most retirees completely overlook › Will you be 73 years old (or older) at any point in 2025? And, do you have any non-Roth IRAs? If your answer to both questions was "yes," then -- if you haven't yet -- you'll soon be making a taxable withdrawal. The IRS requires it. It's called a required minimum distribution, or RMD, in fact. But what's the minimum $100,000? It depends on your age. The older you are, the more you're required to withdraw every year. For perspective, here's the RMD on this amount of money for a range of ages. 73: $3,773.58 75: $4,065.04 80: $4,950.50 85: $6,250.00 90: $8,196.72 And the number continues rising all the way until you turn 120, at which point your RMD is always 50% of your IRA's value as of the end of the prior calendar year. Housekeeping Your broker or IRA's custodian can provide you with the information you need to determine your yearly RMD. Just know that it's your responsibility to initiate the distribution. There's also some flexibility in how you take your RMD. For instance, you might be able to combine the value of multiple retirement accounts yet take your entire required distribution from just one; 401(k) accounts are an exception to this option, though. You're also allowed to take an in-kind distribution of investments already in your IRA, if you like, rather than taking your RMD in cash. Just be aware that doing so won't change the taxability of your distribution, which the IRS sees and treats as income. As for timing, RMDs should be completed by Dec. 31. The one exception is your first one, which doesn't need to be done until April 1 of the year after you turn 73. You might not want to wait that long, though. Your tax bill comes due for the year the RMD is completed. By waiting, you'll be making two required taxable distributions in the same tax year, potentially pushing you into a higher tax bracket. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. How Much Is the Required Minimum Distribution (RMD) if You Have $100,000 in Your Retirement Accounts? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13 hours ago
- Business
- Yahoo
Did You Miss These 3 Required Minimum Distribution (RMD) Rule Changes From 2024?
Key Points RMDs are mandatory distributions from certain retirement accounts that begin at age 73. You no longer need to take RMDs from Roth accounts. If you inherit an IRA from your spouse, you may get some additional flexibility. The $23,760 Social Security bonus most retirees completely overlook › Most of us will spend decades stashing money in tax-advantaged accounts, like 401(k)s and individual retirement accounts (IRAs), to build a nest egg that can sustain us in retirement. But eventually, you'll need to tap those funds -- even if you don't need the money just yet -- thanks to something called required minimum distributions (RMDs), which ensure the IRS eventually gets a cut of those tax-advantaged dollars. RMDs are mandatory withdrawals from retirement accounts that currently begin at age 73. However, the starting age is slated to increase to 75 in 2033 under the rules of the Secure Act 2.0, which passed in late 2022. If you have modest savings, mandatory distributions may not be such a big deal because you're probably making withdrawals by the time you reach RMD age. But for those with substantial retirement assets, RMDs can result in a big tax bill. The rules surrounding RMDs are complex and changed significantly under both the original SECURE Act (passed in 2019) and the Secure Act 2.0. Here are three new rules that took effect in 2024 that every retiree needs to know. 1. RMDs are no longer required for any Roth account Unlike traditional retirement accounts that are funded pre-tax and taxed upon withdrawal, Roth accounts don't offer an up-front tax break. Instead, you make your contributions with money that's already been taxed and then get potentially tax-free income in retirement. But before 2024, only Roth IRAs were exempt from RMDs. You still had to take RMDs -- and pay the resulting tax bill -- for accounts including Roth 401(k)s and Roth 403(b)s, even though you'd already paid taxes on the money you contributed. That all changed last year, though. For 2024 and subsequent tax years, Roth accounts are no longer subject to RMDs. You can let your money grow indefinitely in a Roth account for your entire lifetime, making them an effective tool for passing down wealth to heirs. 2. The penalties for not taking RMDs is reduced Missed your RMD deadline? In the past, you were penalized by a jaw-dropping 50% of the amount you should have taken. Fortunately, the Secure Act 2.0 softened the rules a bit. As of 2024, the penalty is reduced to 25% of the RMD. If you can show that you took quick action to correct your mistake, the penalty drops to 10%. Technically, this change took effect in 2023, but it applies to tax returns filed in 2024 and subsequent years. 3. More flexibility for spouses inheriting an IRA RMDs can be especially tricky if you inherit an IRA, and the rules changed considerably under the original SECURE Act, which passed in 2019. But you generally have more options if you inherit an IRA or another type of retirement account from your spouse than you'd get as a non-spouse. For example, if you're a surviving spouse, you can keep the inherited account in your deceased spouse's name and delay distributions until they would have reached RMD age. You can also or roll over the account into your own IRA and treat it as if you were the original owner -- meaning RMDs would be based on your age, not your late spouse's. Neither of these options are available to non-spouse beneficiaries. None of that was new in 2024. But surviving spouses got some extra flexibility under new Secure Act 2.0 rules that took effect last year. In a nutshell, RMDs for your own retirement account are usually calculated according to what's known as the IRS Uniform Lifetime Table (ULT). But if you inherit an IRA, you usually have to go by the IRS Single Life Expectancy Table (SLET), which calculates RMDs based on the beneficiary's life expectancy -- and usually results in larger RMDs. Now, if you inherit an IRA from your spouse, you can opt to take RMDs using the ULT. That can translate to smaller RMDs and, hence, a smaller tax bill. (Note: This change only applies if your spouse died before reaching RMD age.) Suppose you inherited a $500,000 retirement account from your spouse at age 73 and keep it in your spouse's name. Under the SLET, your first RMD would have been $30,488. But as of 2024, you can use the ULT, which would result in an RMD of just $18,868 -- allowing more of your money to continue growing on a tax-deferred basis. Sound complicated? It sure is. That's why it's essential to consult with a knowledgeable tax attorney or CPA if you inherit a retirement account. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Did You Miss These 3 Required Minimum Distribution (RMD) Rule Changes From 2024? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
How Much Is the Required Minimum Distribution (RMD) if You Have $100,000 in Your Retirement Accounts?
Key Points Once you reach the age of 73, the IRS requires you to make minimum annual distributions from non-Roth retirement accounts. You must calculate your own RMD based on the value of your ordinary IRAs as of the end of the previous calendar year. There is some flexibility as to how and when you complete your required minimum distribution, but you'll still want to be smart about utilizing particular options. The $23,760 Social Security bonus most retirees completely overlook › Will you be 73 years old (or older) at any point in 2025? And, do you have any non-Roth IRAs? If your answer to both questions was "yes," then -- if you haven't yet -- you'll soon be making a taxable withdrawal. The IRS requires it. It's called a required minimum distribution, or RMD, in fact. But what's the minimum $100,000? It depends on your age. The older you are, the more you're required to withdraw every year. For perspective, here's the RMD on this amount of money for a range of ages. 73: $3,773.58 75: $4,065.04 80: $4,950.50 85: $6,250.00 90: $8,196.72 And the number continues rising all the way until you turn 120, at which point your RMD is always 50% of your IRA's value as of the end of the prior calendar year. Housekeeping Your broker or IRA's custodian can provide you with the information you need to determine your yearly RMD. Just know that it's your responsibility to initiate the distribution. There's also some flexibility in how you take your RMD. For instance, you might be able to combine the value of multiple retirement accounts yet take your entire required distribution from just one; 401(k) accounts are an exception to this option, though. You're also allowed to take an in-kind distribution of investments already in your IRA, if you like, rather than taking your RMD in cash. Just be aware that doing so won't change the taxability of your distribution, which the IRS sees and treats as income. As for timing, RMDs should be completed by Dec. 31. The one exception is your first one, which doesn't need to be done until April 1 of the year after you turn 73. You might not want to wait that long, though. Your tax bill comes due for the year the RMD is completed. By waiting, you'll be making two required taxable distributions in the same tax year, potentially pushing you into a higher tax bracket. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. How Much Is the Required Minimum Distribution (RMD) if You Have $100,000 in Your Retirement Accounts? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
5 days ago
- Business
- CNBC
Trump's ‘big beautiful bill' makes Roth conversions more complicated — here's what to know
If you're eyeing a Roth conversion, President Donald Trump's "big beautiful bill" could make the strategy more complicated, according to financial experts. Roth conversions transfer pretax or nondeductible individual retirement account funds to a Roth IRA, which starts future tax-free growth. The trade-off is paying regular income taxes on the converted balance. Trump's new tax cuts could make Roth conversions more appealing for some investors, experts say. But incurring too much income could impact eligibility for certain tax breaks. More from Personal Finance:What to do with RMDs when you don't need the moneySocial Security COLA may be 2.7% in 2026: estimatesOlder student loan borrowers face high delinquency rates When weighing Roth conversions, you need to know the multi-year state and federal tax impact, said Judy Brown, a certified financial planner who works at SC&H Group in the Washington, D.C., and Baltimore area. For example, if you're nearing Medicare age or already enrolled, boosting your earnings could increase income-related monthly adjustment amounts, or IRMAA, for Medicare Part B and Part D premiums. The strategy is "looking at a lot of different pieces, and figuring out the optimal place for each client," said Brown, who is also a certified public accountant. Roth conversions have always been about "tax bracket management," said CFP Patrick Huey, owner of Victory Independent Planning in Portland, Oregon. When making Roth conversions, advisors typically incur enough regular income to "fill up the lowest brackets," he said. Your federal brackets are based on each part of your "taxable income," which you calculate by subtracting the greater of the standard or itemized deductions from your adjusted gross income. Before Trump enacted the One Big Beautiful Bill Act, lower federal income tax brackets were scheduled to sunset after 2025, which would have made converted balances more expensive. Trump's legislation made the lower tax rates permanent, but several new tax breaks — deductions for older Americans, tipped workers and consumers with overtime pay and car loan interest — are temporary with varying earnings limits. These tax breaks, which are available from 2025 through 2028, could offer more room for Roth conversions before hitting the next tax bracket, experts say. Once these cuts expire, you could be "paying more for the exact same Roth conversion," said CFP Ashton Lawrence at Mariner Wealth Advisors in Greenville, South Carolina. While Trump's new tax cuts could make more space in the lower tax brackets, higher income from Roth conversions can impact eligibility, experts say. For example, the additional $6,000 deduction for older Americans starts to phase out, or get smaller, once modified adjusted gross income exceeds $75,000 for single filers or $150,000 for married couples filing jointly. It probably still makes sense to convert funds at 22% or 24% tax rates now — and skip the $6,000 deduction — to avoid the 30% brackets for large pre-tax required withdrawals later, Brown said. Most retirees must take required minimum distributions, or RMDs, from pretax retirement accounts starting at age 73 or face an IRS penalty.
NBC News
12-08-2025
- Business
- NBC News
These are smart moves for required withdrawals in retirement when you don't need the money
As year-end approaches, some older Americans must soon take required withdrawals from retirement accounts — and there are several options if you don't need the money, experts say. Most retirees must take required minimum distributions, or RMDs, from pretax retirement accounts starting at age 73 or face an IRS penalty. The first deadline is April 1 of the year after turning 73, and Dec. 31 is the due date for future years. But some retirees have 'a lot of guaranteed income' before RMDs, or spend less than they have coming in, according to Judy Brown, a certified financial planner who works at C&H Group in the Washington, D.C. and Baltimore area. In 2024, Social Security was the most common source of retirement income. But 81% of retirees had one or more types of private income, such as pensions, investments, rental income or employment, according to a Federal Reserve report published in May. When retirees have more than they need, there could be decisions about how to spend or reinvest their RMDs, experts say. 'It can definitely impact a lot of people,' and the right choice depends on your financial needs and goals, said Brown, who is also a certified public accountant. Here are some options to consider. Reinvest with exchange-traded funds If you still want long-term growth, you can reinvest RMD proceeds into a brokerage account. But you need to choose assets carefully because the account incurs yearly taxes, experts say. Typically, experts suggest exchange-traded funds, or ETFs, over mutual funds in a brokerage account because the assets are less likely to distribute capital gains or dividends throughout the year. 'It's also easier for tax-loss harvesting,' which involves selling a losing brokerage account asset to offset other portfolio gains, Brown said. Since ETFs trade throughout the day like a stock, you have more control when selling specific assets, she said. 'Skip the tax bill' with a transfer to charity For charitable investors, you could also consider a so-called qualified charitable distribution, or QCD, experts say. Open to retirees age 70½ or older, QCDs are a direct transfer from an individual retirement account to an eligible non-profit organization. For 2025, the limit is $108,000 per investor. Once you're 73 or older, you can use QCDs to satisfy yearly RMDs and the transfer won't increase your adjusted gross income. 'It's the IRS' best-kept secret for retirees,' said CFP Ashton Lawrence at Mariner Wealth Advisors in Greenville, South Carolina. 'Skip the tax bill and help a cause you believe in.' Legacy planning with a 529 contribution If legacy planning is important, you can also consider using RMDs to contribute to a 529 college savings plan for your family, experts say. As of May 2025, more than 30 states offer a state tax credit or deduction for 529 contributions, according to education website Saving for College. In most cases, this requires a deposit to your state's plan. There is not currently a federal income tax break for contributions.'It's not going to be enough to offset all of their state [income] taxes,' said Brown. But you can 'get a benefit going for the grandchildren' while securing a state tax break for yourself, she said.
