2023 Update to IRA and Retirement Plan Required Distributions: What to Know
SECURE Act legislation made changes to required minimum distribution (RMD) rules. If you took an unnecessary RMD, the IRS may allow you to roll it back.
Key Takeaways
The SECURE 2.0 Act changed the required minimum distribution (RMD) age from 72 to 73 in 2023.¹
Some investors may have taken unnecessary distributions from their retirement accounts.
The IRS is providing further guidance for those who wish to roll back distributions into their accounts.
IRS Offers RMD Rollback Option Related to Change in RMD Age
The RMD age changed from 72 to 73 effective January 1, 2023, but due to the timing of IRS communication, many investors withdrew a 2023 RMD when it was not required. As a result, the IRS is providing relief to those who took an unnecessary distribution.
If you turned 72 in 2023 and took what you thought was your 2023 RMD between January 1 and July 31, 2023, you have until September 30, 2023, to roll back that distribution. You are not obligated to do so, and you may wish to consult a tax advisor before deciding if a rollover is in your best interest.
Rolling Back RMDs for IRAs
This indirect rollover does not count toward the IRS’s one-rollover-per-year rule over the last 12 months, but it will count toward your one rollover for the next 12 months.
If you had more than one RMD withdrawal (such as systematic payments), they can be returned as one rollover.
You are responsible for confirming that the amount rolled over does not exceed the amount calculated as your 2023 RMD and that the redemption occurred during the IRS’s January 1 – July 31 period.
You may roll back all or part of the 2023 RMD. Any amount not returned will remain a taxable distribution, including any income tax withheld. If you roll back the RMD and don’t want the withheld amount to remain a taxable distribution, you will need to make up that amount out of pocket.
Rolling Back RMDs for Other Plans – 401(a), 403(b), 457(b), QRP
Your retirement plan must allow rollovers back into the account.
If the plan does not allow rollovers, the assets may be rolled into a Rollover IRA or Roth IRA.
Most IRA rollback rules listed above also apply to 401(a), 403(b), 457(b) and qualified retirement plans (QRPs); the first bullet point regarding allowable rollovers does not apply to these accounts.
Next Steps
If you choose to do the indirect rollover, you can send a check by mail or, if you have bank account information on file for purchases, you may call us or complete the purchase online. Be sure to remit the funds by the IRS’s September 30 deadline.
This applies to individuals who reached age 72 on or after January 1, 2023. In 2033, the age will increase to 75.
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.