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Required Minimum Distributions: Updates for 2024

New regulations affect required distributions from IRAs and retirement accounts—and if you took an unnecessary distribution, the IRS may allow you to roll it back.


Key Takeaways

If you turn 73 in 2024, you must start taking required minimum distributions (RMDs) from your retirement accounts.

The age requirement to begin taking RMDs changed from 72 to 73, effective in 2023.

It’s possible to save money on taxes by planning strategically for RMDs.

If you’re retired or nearing retirement age and you have tax-advantaged retirement accounts such as an IRA or 401(k), it’s essential to understand your obligations for required minimum distributions (RMDs). And if you’re turning 73 in 2024, it’s time to start taking RMDs from your retirement account.

What Are RMDs?

RMDs are required distributions from retirement accounts such as traditional IRAs and 401(k) plans, funded with pre-tax contributions. The IRS allows you to deduct contributions to these accounts from your taxable income and pay taxes only on the withdrawals. But the IRS isn’t willing to wait forever to get its share. When you reach age 73, you are required to begin taking distributions (and paying taxes on them) on an annual basis.

Retirement plans that were funded with after-tax income, such as Roth IRAs and Roth 401(k) plans, do not require any distributions during the owner’s lifetime.

RMD Age Requirements

Traditionally, Americans with tax-advantaged retirement accounts were required to begin taking minimum distributions from those accounts when they turned 70 ½ years old. The age to begin taking RMDs then increased to 72. But in 2022, changes were made to the Setting Every Community Up for Retirement Enhancement (SECURE) Act, moving the RMD age up to 73. That means that if you were born between January 1, 1951, and December 31, 1951, your first RMD is due during the 2024 tax year, or by April 1, 2025.

For the first tax year you’re required to take an RMD, you have until April 1 of the following year to take the distribution. But in all subsequent years, you’re generally required to take annual RMDs by December 31.

How to Calculate RMDs

The amount you must withdraw from your account as a minimum required distribution depends on your IRS life expectancy factor and the balance of your retirement account. The exact distribution amount is calculated by dividing the year-end value of your account by the estimated remaining years of your lifetime, based on life expectancy tables provided from the IRS. Most people use the Uniform Lifetime Table, but the IRS has other tables for people with spouses who are more than 10 years younger in age.

Calculate You RMD for This Year

Rather than manually compute your RMD, use our calculator. You can also calculate it for multiple years using our RMD planner.

Calculate RMD

What if You Miss an RMD?

If you miss the deadline for a required IRA distribution, you’ll have to pay a penalty. Historically, the penalty was 50% of the required distribution, but new legislation reduced the penalty to 25%. If you take the RMD and correct the mistake in a timely manner, however, the IRS may reduce the penalty to 10% or waive it altogether.

To request a penalty reduction, you’ll need to complete IRS Form 5329. If you believe you have reasonable cause for requesting a waiver of the penalty, follow the instructions regarding waiver of tax for reasonable cause on IRS Form 5329.

RMD Strategies

If you need the funds from your RMDs to cover living expenses for the year, that’s exactly what you should do with them. But if your expenses are covered by other funds, it can be difficult to figure out the best way to strategically use your RMDs. Here are a few ideas:

  • You can reinvest your RMD—but there are rules. You aren’t allowed to reinvest the funds in most retirement accounts as a rollover, but you can invest them in taxable accounts.

  • You can redirect your RMD to other tax-advantaged uses, such as contributing to a 529 plan for the education of a child or grandchild or making a gift to a charitable organization.

Tax Planning With RMDs

Wondering how RMDs will affect your overall tax liability? If that’s a concern, we encourage you to consult a tax advisor to discuss the best ways to minimize taxes with RMDs.

For example, you might consider a Roth IRA conversion, which involves converting a traditional IRA to a Roth IRA. With a Roth conversion, you’re responsible for paying taxes on the funds moved from a traditional IRA into a Roth IRA at the time of conversion. But after the conversion is complete, you’re no longer responsible for taking annual required distributions and paying taxes on qualified distributions.

Another option for potentially reducing your tax bill after taking RMDs is tax-loss harvesting. If you have investments that have lost value in the market, you may consider selling them at a loss to offset some of your ordinary income, such as a distribution from your IRA. Keep in mind that there are limits to the amount of tax you can offset with investment losses, and you cannot buy a security that is substantially identical to the security you sold within 30 days.

Get in Touch

Need advice about how to structure your required minimum distributions or maximize tax planning with RMDs?

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.

Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.

Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.