The RMD deadline is quickly approaching, and missing it could cost you significant money. If you are at least 72 years old, you should withdraw your minimum payout to avoid a hefty penalty or double-dipping next year.
There is still time to take your 2024 RMD from your conventional IRA, 401(k), or another retirement account (excluding a Roth IRA) before the deadline…
Therefore, you should hurry! The deadline for taking this year’s RMD for most seniors at least 72 years old is December 31, which is only a matter of weeks away!
And if you do not withdraw enough from your retirement accounts this year, the IRS might impose a 50% penalty on the amount not withdrawn as required. That is a severe punishment that you should avoid at all costs.
Extended Time to Take Your RMD?
Some individuals have more time to take their 2024 RMD. Your first RMD can be taken as early as April 1, 2024, if your 72nd birthday falls in 2024. While that option is available, you do not have to wait until April 1.
In 2024, you will have to take two RMDs if you delay your first RMD until April 1, which might raise your tax liability. Two RMDs in one year, for instance, might push you into a higher tax rate or impact the amount of your Social Security payments that are taxable. Alternatively, if you earned a substantial amount of money in 2024, it may be prudent to wait for your first RMD to prevent similar issues this year. It depends on your specific circumstances.
Determining Your RMD
The minimum amount necessary to be withdrawn in 2024 is generally computed by dividing the account balance at the end of 2021 by a life expectancy factor published by the IRS in Publication 590-B. Fortunately, adjustments to the life expectancy statistics will result in fewer RMDs for seniors in 2024 compared to prior years.
If you have more than one traditional IRA, you must calculate a separate RMD for each, but you can sum the RMD amounts and withdraw the total from any of your IRAs. If you have numerous 401(k) accounts, however, you must calculate and withdraw the RMD from each plan individually. (Your 401(k) plan administrator or sponsor should compute your RMD.)
Release of RMD Penalty
It is possible to escape the 50% tax penalty. If your failure to take the RMD was due to a reasonable mistake, you may obtain a waiver and take whatever actions are necessary to boost your distribution to the required amount. To seek a waiver, submit Form 5329 with an explanation of the error and the efforts you’re making to rectify the situation.
Steps to Take Immediately
If you are 72, you should act now if you still need to withdraw the appropriate cash from your retirement account. Contact the banking institution managing your account immediately and arrange a withdrawal (you might want to take out a little extra for your RMD to take care of estimated tax payments).
The majority of significant financial institutions permit online RMD setup. Some organizations will even automatically execute an RMD if they do not get a completed form or online request by the deadline (to avoid a penalty). Nevertheless, at this time of year, the essential thing is to get started immediately!