Key Points
-
Individual retirement accounts are subject to required taxable distributions once their owners reach a certain age.
-
The older the retired investor, the larger the percentage of your holdings that must be withdrawn.
-
Retirees with multiple IRAs of the same type do have some flexibility in how they take these distributions.
With the year winding down, older investors with money sitting in ordinary IRAs may soon need to withdraw at least some of it. It’s called a required minimum distribution, or RMD.
What’s the minimum? It depends on your age and the total market value of your retirement accounts as of the end of calendar 2024. Here’s the required minimum distribution on $50,000 worth of retirement savings at a range of ages, beginning with age 73, which is when RMD rules first kick in.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
- 73: $1,886.79 (3.77%)
- 75: $2,032.52 (4.06%)
- 80: $2,475.25 (4.95%)
- 85: $3,125.00 (6.25%)
- 90: $4,095.36 (8.20%)
- 100: $7,812.50 (15.62%)
The size of the required — and taxable — distribution grows as you age, maxing out at 50% of the prior year’s ending balance for anyone lucky enough to reach the age of 120.
Important RMD rules
There are some noteworthy rules to consider here. Chief among them is that RMD rules only apply to ordinary IRAs like contributory/traditional IRAs, 401(k) accounts, or 403(b) accounts. They don’t apply to Roth IRAs.
Image source: Getty Images.
It’s also worth noting that you don’t necessarily need to take an RMD from each and every IRA you own. You can combine the value of all your ordinary IRAs and take a distribution from just one. And you can do the same for 403(b) accounts, although you can’t mix and match 403(b) and traditional IRA accounts. One key exception is 401(k) accounts; you must take your calculated minimum distribution from each and every one, assuming you own more than one.
As for timing, although your very first required minimum distribution doesn’t need to be completed until April 1 in the year after you turn 73, subsequent RMDs must be completed by the end of the calendar year. Just bear in mind that waiting until the last minute to take your first RMD means you’ll be taking two taxable distributions in the same tax year.
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 “Social Security secrets” 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 strategies.
View the “Social Security secrets” »
The Motley Fool has a disclosure policy.
