How do I determine my RMD age? The newest rules explained

Recent legislative changes have shifted the age when retirees must begin taking Required Minimum Distributions (RMDs), impacting millions of retirement savers. This evolution can cause confusion, making it crucial to know exactly how do I determine my RMD age based on my birth year and recent law updates.

Quick Summary

Your RMD age depends entirely on your birth year, with the SECURE 2.0 Act establishing a tiered system to increase the required beginning date. For those born in 1960 or later, the RMD age is now 75, while earlier birth years fall under different rules.

Key Points

• Birth Year Matters: The SECURE 2.0 Act introduced a tiered system for RMD ages, so your specific start age depends on when you were born.

• RMD Age 73 for Mid-Century Babies: If you were born between 1951 and 1959, your RMD age is 73.

• RMD Age 75 for Later Generations: For individuals born in 1960 or later, the RMD age is now 75, providing more time for tax-deferred growth.

• Working Exception for Workplace Plans: Unlike IRAs, you may be able to delay RMDs from a workplace plan (like a 401(k)) past your RMD age if you are still working for that company and are not a 5% owner.

• Penalties are Lower, But Still Exist: The penalty for missing an RMD has been reduced from 50% to 25% (or 10% if corrected in a timely manner), but proactively planning is still the best approach.

• First RMD Deadline Flexibility: You can delay your first RMD until April 1 of the year following your RMD age year, but this means taking two RMDs in one calendar year.

Understanding the Shift in RMD Rules

Required Minimum Distributions (RMDs) are mandatory withdrawals from most tax-deferred retirement accounts, such as traditional IRAs, SEP IRAs, and employer-sponsored plans like 401(k)s. Historically, the starting age for these distributions was 70½. However, landmark legislation has progressively pushed this age back to accommodate longer life expectancies and evolving retirement trends.

The initial change came with the original SECURE Act of 2019, which moved the RMD age from 70½ to 72 for those who turned 70½ after December 31, 2019. More recently, the SECURE 2.0 Act of 2022 introduced further modifications, creating a new, staggered timeline for retirement account owners. This means your specific birth year is the most critical factor in determining your RMD age, making it more complex than a single universal age.

The Staggered RMD Age Brackets

To figure out your precise RMD start date, you must identify which birth year bracket you fall into. This applies to original account owners of traditional IRAs and most employer-sponsored plans. Roth IRAs are an exception, as they do not require distributions during the owner's lifetime.

Individuals Born Before 1951

• RMD Age: 70½
• If you were born before July 1, 1949, your RMD age was 70½. You were already required to be taking distributions and are not affected by the SECURE Act or SECURE 2.0 changes.
• If you were born between July 1, 1949, and December 31, 1950, your RMD age is 72 under the original SECURE Act, but you have likely already started taking distributions.

Individuals Born 1951 through 1959

• RMD Age: 73
• The SECURE 2.0 Act specifically raised the RMD age to 73 for those who turn 72 after December 31, 2022. This means if your birth year is between 1951 and 1959, your RMD age is 73.

Individuals Born 1960 or Later

• RMD Age: 75
• For those born in 1960 or later, the SECURE 2.0 Act has delayed the RMD age even further, to 75. This provides more time for tax-deferred growth in your retirement accounts.

Workplace Plan vs. IRA Considerations

There are key differences in RMD rules for workplace retirement plans (like 401(k)s and 403(b)s) versus IRAs. For most workplace plans, you can delay your RMDs beyond your applicable age if you are still working for the company that sponsors the plan. This exception does not apply if you own 5% or more of the business. However, IRA owners must begin taking RMDs once they reach their required beginning date, regardless of their employment status. This is a crucial distinction to remember as you manage your retirement income strategy.

Comparing RMD Start Ages by Birth Year

If You Were Born	Your RMD Age Is	Your First RMD Must Be Taken By
Before July 1, 1949	70½	You should have already started
July 1, 1949 - Dec 31, 1950	72	You should have already started
Jan 1, 1951 - Dec 31, 1959	73	April 1 of the year after you turn 73
Jan 1, 1960 or later	75	April 1 of the year after you turn 75

What to Do If You Miss an RMD

Failing to take a required minimum distribution can result in stiff penalties from the IRS. The SECURE 2.0 Act reduced the penalty for a missed RMD from 50% to 25% of the amount that should have been withdrawn. Furthermore, if the mistake is corrected in a timely manner, the penalty may be reduced to 10% for IRA owners. To correct a missed RMD, you must make the withdrawal and file IRS Form 5329, Request for Penalty Waiver.

Proactive Steps for Retirement Savers

1. Verify Your RMD Age: Use the table above to confirm your specific RMD starting age based on your birth year. It is vital not to rely on outdated information.
2. Contact Your Custodian: Your financial institution, whether an IRA custodian or employer plan administrator, should be able to provide information on your RMD start date and help calculate the required amount.
3. Plan Ahead: Your first RMD can be delayed until April 1st of the year following the year you reach your RMD age. However, this means you will need to take two distributions in the same year, which could push you into a higher tax bracket. Consider taking your first distribution in the calendar year you turn your RMD age to spread out the tax impact.
4. Understand Your Options: For some accounts, you can take your entire RMD from a single IRA, even if you have multiple. For employer plans, this is not always the case, and you may need to take distributions from each plan. Consult with a professional to understand the best strategy for your situation.
5. Stay Informed: As retirement legislation continues to evolve, it is important to stay current. Keep an eye on IRS announcements for any additional guidance or changes that may affect your retirement planning.

For more detailed information on Required Minimum Distributions and related rules, refer to the official IRS RMD FAQs.

Conclusion

Knowing your RMD age is a critical step in retirement planning. By understanding the new rules set forth by the SECURE 2.0 Act, you can avoid costly tax penalties and strategically plan your withdrawals to optimize your retirement income. Use your birth year to find your designated RMD age and work with a financial professional to ensure you are on track with your distributions.

Frequently Asked Questions

What is the new RMD age for people born in 1959?

If you were born in 1959, your Required Minimum Distribution (RMD) age is 73. This is based on the changes implemented by the SECURE 2.0 Act.

Does the SECURE 2.0 Act apply to my Roth IRA?

No, the SECURE 2.0 Act's RMD rules do not apply to the original owner of a Roth IRA during their lifetime. Roth IRAs are exempt from RMDs for the original account holder.

Can I delay my first RMD past my RMD birthday?

Yes, you can delay your first RMD until April 1st of the year after you reach your RMD age. However, you will still need to take your second RMD by December 31st of that same year.

How are RMDs calculated for traditional IRAs?

An RMD is calculated by dividing your IRA account balance as of December 31st of the previous year by a life expectancy factor provided by the IRS, which can be found in Publication 590-B.

What happens if I miss my Required Minimum Distribution?

If you miss or take an insufficient RMD, the amount not withdrawn is subject to a 25% excise tax penalty, though this can be reduced to 10% for IRA owners if corrected promptly.

Do I need to take an RMD if I'm still working?

For most workplace retirement plans, you can delay your RMD until you retire, as long as you are not a 5% owner of the business. This exception does not apply to traditional IRAs.

Will my investment firm or plan provider automatically calculate my RMD?

Many financial institutions and plan providers will assist in calculating your RMD amount. However, it remains the account owner's responsibility to ensure the correct amount is taken on time.