Key Highlights
- RMDs are mandatory withdrawals from certain retirement accounts.
- Roth IRAs do not have RMDs during the original owner’s lifetime.
- Missing an RMD can result in IRS penalties.
- Planning ahead can reduce tax impact.
What Are Required Minimum Distributions (RMDs)?
Required Minimum Distributions (RMDs) are the minimum amounts the IRS requires you to withdraw each year from certain retirement accounts once you reach a specified age. RMDs apply to:- Traditional IRAs.
- SEP and SIMPLE IRAs.
- Most employer-sponsored retirement plans.
Related: Roth vs. Traditional IRA
When Do RMDs Begin?
Under current IRS rules:
- RMDs generally begin at age 73.
- The exact amount depends on your account balance and life expectancy.
Failure to take an RMD may result in tax penalties.
How Roth IRAs Are Different
One major advantage of Roth IRAs is that:
- They are not subject to RMDs during the original account owner’s lifetime.
This flexibility makes Roth IRAs appealing for:
- Tax planning.
- Estate planning.
- Managing retirement income timing.
Learn how high earners access Roth IRAs: Backdoor IRA
Planning Strategies to Manage RMDs
Common strategies include:
- Roth conversions before RMD age.
- Coordinating withdrawals across accounts.
- Reviewing beneficiaries regularly.
Because rules and tax situations vary, RMD planning is often best reviewed with a professional.
Talk with us.