N
% 2022 Required Minimum Distributions Tax Deadline Looms Javascript must be enabled to use this site. Please enable Javascript in your browser and try again. × Search search POPULAR SEARCHES SUGGESTED LINKS Join AARP for just $9 per year when you sign up for a 5-year term.
visibility
598 views
thumb_up
15 likes
C
Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. Leaving AARP.org Website You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply. Close
Mark Your Calendar Most Required Minimum Distributions Due Dec 31
As with all things tax related you don t want to miss the deadline
iStock / Getty Images Required minimum distributions (RMDs) from employer-based retirement plans and traditional individual retirement accounts (IRAs) for most people 72 and older.
thumb_up
31 likes
C
Those distributions are taxable, and that can take the sparkle out of many taxpayers’ holidays. Although you can’t avoid RMDs, you can take some steps to minimize them. And in most cases, it’s best to take those steps before New Year’s Eve. Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine.
How RMDs work
There’s a reason accountants call traditional IRAs and other retirement plans “tax-deferred plans,” not “tax-free plans.” You don’t pay taxes on your account contributions or earnings — until you take withdrawals.
thumb_up
22 likes
H
And there’s a deadline for how long you can wait before taking the distributions that federal tax law requires. When you turn 72, you must start taking RMDs every year. These rules apply not just to IRAs but also to 401(k), 403(b) and other retirement plans.
thumb_up
18 likes
C
Roth IRAs are not subject to RMDs, but Roth 401(k)s are. RMDs are based the IRS tables. For example, at 72, the average person is expected to live another 27.4 years.
thumb_up
42 likes
Z
To figure the RMD for that year, a person would divide her IRA balance by 27.4. If the balance were $100,000, the person would have to withdraw $3,650, and pay taxes on the withdrawal.
thumb_up
5 likes
B
With one exception, you must take your RMD by Dec. 31.
thumb_up
30 likes
J
The exception: When you turn 72, you have until April 1 of the following year to take your RMD and pay taxes on it. Years ago, Congress determined that it would be benevolent to give people a three-month grace period on their first RMD, says IRA expert Ed Slott.
thumb_up
12 likes
C
“But that’s not really a great deal, either,” Slott says. Why?
thumb_up
22 likes
N
Because you’ll also have to make an RMD by Dec. 31 of that same year — in effect, making two RMDs in one year and possibly pushing you into a higher tax bracket.
thumb_up
45 likes
I
You’re probably better off paying your first RMD in the year in which you turn 72, Slott says. Your RMDs are based on the value of all your tax-deferred accounts as of Dec. 31 of the previous year.
thumb_up
7 likes
S
If you have several tax-deferred accounts, you have to figure out the RMD for each one. You may, however, take the entire RMD out of just one account.
thumb_up
11 likes
L
If you have already taken distributions during the year that are equal to or more than your required RMD, you don’t have to do anything else to satisfy the RMD requirement. The penalty for not taking an RMD is severe: 50 percent of the amount you should have taken out. If you neglect to take a $3,000 RMD, you’ll owe a $1,500 penalty.
thumb_up
24 likes
V
Although the IRS will sometimes forgive the penalty, it’s best not to incur it in the first place. Groceries 20% off a Freshly meal delivery subscription See more Groceries offers > Nevertheless, taking RMDs isn’t the worst thing in the world.
thumb_up
10 likes
I
“If you have large RMDs, that means your account is working well — you don’t want your RMDs getting smaller, which means the account is not growing,” says Catherine Valega, a financial planner at Green Bee Advisory in Winchester, Massachusetts. And, says Slott, most people aren’t required to take an RMD, because about 80 percent withdraw more than the required amount anyway. The remainder hate taking RMDs because they don’t need the money, he says.
thumb_up
6 likes
E
If you think you have to take an RMD, that you can use to figure your RMD for any age. You don’t have to take your RMD in one lump sum; you can withdraw it over the course of the year. One : Convert your traditional IRAs to Roth IRAs before you reach age 72. You’ll have to pay taxes on the amount you convert, but you can keep the remainder growing tax-free — and RMD-free.
thumb_up
45 likes
G
A word of caution: If you convert an IRA to a Roth when you’re required to take distributions, you still have to pay your RMD. You can’t convert an RMD into a Roth. Another strategy: Give your RMD to charity.
thumb_up
21 likes
I
Current tax law allows you to contribute up to $100,000 to charity from an IRA and exclude that donation from your income. “That is a fantastic provision for people who are charitably inclined, and even more so now because most people no longer itemize their deductions due to the higher standard deductions,” Slott says.
thumb_up
41 likes
S
Finally, there is some small comfort from the IRS, which has updated its actuarial tables for RMDs to reflect longer life spans. The longer life span in the tables reduces the amount of RMD that people will have to pay.
thumb_up
5 likes
Z
“You can take out a little less now, based on the new tables, and pay a little less,” Slott says. John Waggoner covers all things financial for AARP, from budgeting and taxes to retirement planning and Social Security. Previously he was a reporter for Kiplinger's Personal Finance and USA Today.
thumb_up
0 likes
L
MORE FROM AARP LEARN MORE ABOUT AARP MEMBERSHIP. Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. AARP VALUE & MEMBER BENEFITS See more Finances offers > See more Vision Benefits offers > See more Retirement offers > See more Technology & Wireless offers > SAVE MONEY WITH THESE LIMITED-TIME OFFERS
thumb_up
50 likes
Similar Discussions
-
A Closer Look at a Notorious MS Symptom Numbness Everyday Health
-
Stickman Clash Fun Fight Game APK Download for Android
-
En direct de La Turballe face au premier champ d oliennes en mer Le 1314inter
-
Jean Carmet combien a t il eu d enfants ? People Jean Carmet
-
Thousands protest proposed taxes on upper class Colombians Colombia Taxes
-
La realidad golpea el Gobierno se faja Expansioncom Opinion
-
Tom Hardy Wins Martial Arts Competition The Nerd Stash
-
What Is the Digital Divide?
-
Aislamiento de las venas pulmonares Médicos y departamentos Mayo Clinic
-
Fans show support for Luke Rockhold as he blasts UFC for underwhelming bonuses
-
Konyaspor vs Vaduz prediction preview team news and more UEFA Europa Conference League Qualifiers 2022 23
-
Here s the first trailer for Need for Speed Unbound
-
Techland clarifies Dying Light 2 s 500 hour completion claim says main story will take 20 hours
-
Fortnite Sapling locations and where to plant saplings at Bomb Crater Clusters
-
Star Trek Prodigy gets a video game in October
-
100 Reps to Bigger Muscles
-
Blast Metabolic Interval Training
-
Why Did Siggy Flicker Really Leave The Real Housewives of New Jersey ?
-
Cyberpunk 2077 Reaches New Sales Milestone Following Edgerunners Success
-
Tom Parker Bowles amp Olly Smith The Bridge Arms and hidden red gems
-
Kim Kardashian Has Become The Family s PR Expert Here s How And Why
-
21 Things You Know If You re Actually Incredible At Giving Gifts
-
Bedava 10 gb internet nasıl yapılır
-
Türk malı yeni bölüm
-
Home Exchange Pros amp Cons of Swapping Houses for Vacation
-
Pediatric wards fill up in Richmond as flu season starts early Axios Richmond
-
Walz and Jensen trade barbs during fiery governor s forum Twin Cities
-
From Research to Standard Practice Advancing Proven Programs to Support Family Caregivers of Persons Living with Demen
-
At 58 drummer Alla Marinow makes her rock n roll debut AARP The Magazine
-
AARP Wisconsin Pushes for Family Caregiving Tax Credits