Required Minimum Distribution

Taxpayers generally have to start taking withdrawals from their Individual Retirement Account (IRA), Simplified Employee Pension (SEP) IRA, Savings Incentive Match Plan for Employees (SIMPLE) IRA, or retirement plan account when reaching age 72 (73 if you reach age 72 after Dec. 31, 2022). These withdrawals, called required minimum distributions (RMDs), are the minimum amounts you must withdraw from your account each year.

The first RMD must be taken by April 1 of the year after you turn 72 (or 73 if you reach the age 72 after Dec. 31, 2022). After the first RMD, subsequent withdrawals generally must be taken by December 31 of each calendar year. For example, if you reached age 72 in 2022, you should have taken your first RMD (for 2022) by April 1, 2023, and then you would have to also take a second RMD (for 2023) by Dec. 31, 2023, to avoid the 50 percent excise tax for distributions that are less than RMD amount (excess accumulations). Note that the excise tax is reduced to 25 percent for tax years beginning in 2023 and after. There is an additional reduction to 10 percent for taxpayers meeting additional requirements. See IRS Publication 590-B for more information.

If you are not sure whether your distributions meet the RMD requirements, you may want to consult with your tax advisor or a tax professional.

Note: Roth IRAs do not require withdrawals until after the death of the owner. However, beneficiaries of the Roth IRA are subject to the RMD rules

The IRS covers the rules, including ages, deadlines, and requirements by plan on https://www.irs.gov/. See the resources listed below for more information.

General Information About Retirement Plans

It is never too soon to start planning for retirement. There are many different types of tax-advantaged retirement plans to consider. Some of the most common retirement plans include IRAs, Roth IRAs, 401(k) plans and other employer-sponsored plans, and government employee retirement plans.

According to the IRS, there are several benefits of setting up a retirement plan:

• Contributions can reduce current taxable income.
• Contributions and investment gains are not taxed until distributed.
• Many contributions are easy to make through payroll deductions.
• Interest accrues over time, which allows small, regular contributions to grow to significant retirement savings.
• Retirement assets can be carried from one employer to another.
• The saver’s credit may be available to some employees.
• Saving now can improve financial security in retirement.

Visit IRS.gov to get a full list of the Types of Retirement Plans to consider and resources to Help With Choosing a Retirement Plan.

Limits for 401(k) plans and other qualified retirement plans

There are limitations on the dollar amount people can contribute to their qualified retirement plans each year. The Internal Revenue Code requires the Secretary of the Treasury to annually adjust these limits for cost-of-living increases.

The IRS has announced that the 2024 contributions limit for 401(k) plans has increased to $23,000, up from $22,500 for 2023. The contribution limit on IRAs in 2024 will increase to $7,000, up from $6,500 in 2023.

Get more details about these increases and the increases for other pensions by reading the IRS’s news release on IRS.gov and IRS technical guidance regarding all of the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2024 in Notice 2023-75.

Additionally, get more information about all the rules, age requirements, deadlines, calculations, contributions, and other details you need to plan out your golden years by visiting https://www.irs.gov/retirement-plans.

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Source : TAS