Title: Four Scenarios Where You Might Evade the 2024 Required Minimum Distribution (RMD) Even if You're 73 or Beyond
Senior adults aged 73 and up must adhere to the IRS's rule of taking required minimum distributions (RMDs) annually from their retirement accounts, or face a costly 25% penalty on the RMD not withdrawn. Those who turned 73 this year have until April 1, 2025, to take their 2024 RMD, but everyone else has only a few weeks left. However, you may not have to take an RMD from certain accounts under these conditions:
1. You've already taken your RMDs for the year
If you've already withdrawn an amount equivalent or surpassing your RMD for the year, there's no further need to withdraw any more for now. Utilize the IRS RMD worksheet to double-check if you've met the required minimum.
Different account types present distinct RMD policies. Iras allow you to withdraw your full RMD from one account, combining your RMD amounts from various accounts, whereas 401(k)s require separate RMDs for each account.
2. You're still working (and own less than 5% of your company)
The IRS forgives RMDs from your current workplace retirement plan if you're actively employed and possess less than 5% ownership in the company. In such cases, RMDs for this specific account commence the year following retirement.
This exemption only applies to your current workplace retirement plan. Nonetheless, you're still required to take RMDs from your IRAs and any workplace plans connected to former employers. However, you might be able to bypass the latter by transferring your old 401(k)s into your current retirement plan if permitted.
3. You have Roth retirement accounts
Roth Iras have long been exempt from RMD obligations, while as of 2024, Roth 401(k)s are no longer bound to RMDs. Since you've previously funded these accounts with after-tax income, withdrawals are generally tax-free, eliminating the need for IRS to force withdrawals.
4. You've made a sizable enough qualified charitable distribution (QCD)
The IRS grants mature individuals aged 73 and up the option to avoid RMDs and taxable income increases by directly donating to qualified charitable organizations. In comparison to a traditional IRA distribution, QCDs do not impact adjusted gross income (AGI).
You can transfer up to $105,000 in 2024 for QCDs, even if you opt for the standard deduction that year. Remember to retain receipts for your donation, as proof will be essential in case of an IRS audit.
QCDs aid in meeting the RMD amount, thereby preventing the 25% penalty for failing to adhere to RMDs. Unlike the majority of IRA distributions, a QCD does not contribute to AGI. Consequently, higher AGIs can influence eligibility for certain tax credits and deductions, as well as forcing you to pay Social Security benefit taxes.
To make the most of any exemptions, act swiftly – avoid the last minute rush to withdraw RMDs from your account.
In terms of retirement planning and finance, some individuals may not need to take their required minimum distributions (RMDs) annually if they have already exceeded their RMD for the year from their retirement accounts, as specified by the IRS RMD worksheet. Moreover, if senior adults are still employed and own less than 5% of their company, they can defer their RMDs from their current workplace retirement plan, according to IRS regulations.
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