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Understanding Required Minimum Distributions

Rules, Reminders and Remedies for Retirement Plan Participants

Required Minimum Distributions (RMDs) can be confusing. Recent legislation has changed the RMD age limit, and there are important deadlines and tax considerations to be aware of, as well as steps you can take if you miss a deadline. Here’s what you need to know.

What is an RMD?

A retirement account is a great way to save for your future, but once you reach a certain age, the IRS requires that you start withdrawing a percentage of your assets from your 401(k), 403(b) and other types of tax-deferred retirement accounts each year. This is known as the Required Minimum Distribution, usually referred to as an RMD for short. Note: RMDs apply to traditional IRAs, but they do not apply to Roth IRAs because contributions are made with income that has already been taxed.

What types of retirement plans do RMD rules apply to?

  • 401(k) plans
  • 403(b) plans
  • 457(b) plans
  • Profit-sharing plans
  • SEP IRAs
  • Traditional IRAs
  • Other defined contribution plans

When do I need to start making RMD withdrawals?

Past: The SECURE Act of 2019 changed the RMD rules to increase the age for the required beginning date for RMDs from age 70½ to age 72, applicable to participants who reach age 70½ on or after January 1, 2020.

Present: The SECURE 2.0 Act of 2022 increases the age for the required beginning date for RMDs still further, to age 73, as of January 1, 2023.

Future: In ten years, the RMD age will rise yet again to 75.

How is the amount of my RMD withdrawal determined?

The amount changes each year. The IRS uses a formula for determining the amount of your RMD, which divides the total of all your tax-deferred retirement savings accounts by your life expectancy. If you’ve reached the mandatory age for making withdrawals, the Securities and Exchange Commission (SEC) makes available a calculator to determine how much money you need to take out of your 401(k) or traditional IRA.

What if I have more than one tax-deferred savings account?

IRAs and 403(b)s

If you have more than one IRA or more than one 403(b) account, you must calculate the RMD for each IRA or account separately each year. However, you may aggregate your RMD amounts for all your IRAs and all your 403(b)s and withdraw the total from one IRA or 403(b) account. Alternatively, you can withdraw a portion from each of your IRAs or each of your 403(b) accounts. 

401(k) and other Defined Contribution Plans

If you have more than one defined contribution plan, you must calculate and withdraw your RMDs separately for each plan.

When is my RMD withdrawal due?

  • If you reach age 72 in 2022, you need to make your first RMD withdrawal by April 1, 2023, and an additional withdrawal by December 31, 2023, of each subsequent year.
  • If you reach age 72 in 2023, you need to make your first RMD withdrawal by April 1, 2025, and an additional withdrawal by December 31, 2025, of each subsequent year.

What happens if I miss an RMD deadline?

Mistakes happen, but if you miss the RMD deadline, you could be liable for a 25% penalty tax based on the amount owed.

  • If you correct the error in a timely manner, the penalty tax is reduced to 10%. In order to make the correction and pay the excise tax, you will need to file IRS Form 5329 with an accompanying check to cover the payment.
  • As an alternative, you might consider requesting a waiver. The IRS may waive the penalty if you made what the IRS considers a “reasonable error” that caused you to miss the RMD payment deadline or underpay what you owed. To make your request, return IRS Form 5329 with a letter explaining why you believe you qualify, including the steps you have taken to rectify the error. You will be notified by the IRS about its decision to grant or deny your request. Note: No payment is required when making the waiver request.

We're here to help.

For additional information about RMDs or for answers to your questions, contact your local Mutual of America representative, or call 866.954.4321.