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IRA Required Minimum Distributions by December 31

Each year the Internal Revenue Service reminds taxpayers over age 72 to take their required minimum distribution (RMD) by December 31.

One exception to this applies to IRA owners who turned age 72 in 2022. These individuals may delay their first RMD until April 1, 2023. However, if their first RMD is delayed, a second RMD will be required by December 31, 2023.

RMDs are generally required for most qualified retirement plans and apply to three types of IRA: Individual Retirement Arrangements (IRAs), Simplified Employee Pension Plans (SEPs) and Savings Match Plans for Employees (SIMPLE) IRAs.

RMDs also apply to 401(k), 403(b) and 457(b) plans. An exception to the RMD requirement is a Roth IRA - there are no distribution requirements for this plan as long as the original owner is living.

Most taxpayers take a RMD based upon the Uniform Lifetime Table in IRS Pub. 590-B. This table assumes two beneficiaries, one of which is no more than 10 years younger than the IRA owner, and calculates a distribution amount based on both ages. If the IRA owner has a spouse more than 10 years younger, a special calculation is applicable.

Owners of multiple IRAs must calculate the RMD for each plan. However, the owner can elect to withdraw the total RMD amount from any IRA plan.

Some employees over age 72 who are still working and are not major owners of a business may be able to defer their RMDs until after retirement. Employees should consult with a tax advisor if this exception is applicable.

Many online calculators are available to determine a RMD. Most large financial companies offer an online determination of the correct amount. RMDs start at approximately 3.6% of the December 31st IRA balance and increase each year after age 72. There are online worksheets on IRS.gov that may be helpful.

The IRS released new IRA distribution tables for 2022. The new tables reflect longer life expectancies and future RMDs will be slightly reduced.

Editor's Note: An excellent way to fulfill an RMD is to give part or all of the IRA distribution to a qualified charity. Qualified charitable distributions (QCDs) for individuals over age 70½ may fulfill part or all of your RMD. The QCD is a direct transfer from the IRA custodian to a qualified charity, up to $100,000 may be transferred in a single year. It is important to act quickly if you plan to do a QCD this year. Your QCD must be completed by December 31, 2022 if it is intended to satisfy your 2022 RMD.

Published November 18, 2022
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