Non-deposit products are: not insured by the FDIC;
are not deposits; and may lose value.
What is an RMD?
The RMD is the amount that you are required to distribute from your Traditional IRA or Inherited IRAs each year. Roth IRAs are not subject to RMDs until after the death of the owner.
At what age must I start taking an RMD?
SECURE 1.0 and SECURE 2.0 increased the RMD age. See chart below:
| Birth Year | RMD Age | Required Beginning Date (RBD) |
|---|---|---|
| June 30, 1949 or earlier | 70½ | April 1, 2020 or earlier |
| July 1, 1949 - December 31, 1950 | 72 | April 1, 2022 - April 1, 2023 |
| 1951-1958 | 73 | April 1, 2025 - April 1, 2032 |
| 1959 or later | 75 | April 1, 2035 or later |
When does my RMD need to be distributed?
Your first RMD must be taken by April 1st of the year following the year in which you turn age 73. This is your RBD. In all future years, you will be required to take the RMD by December 31st. If you delay your first RMD to April 1st, you will be taking two taxable distributions in one year.
How is my RMD calculated?
The RMD is calculated by dividing the prior year December 31 balance of the IRA by a life expectancy table factor that is published in the Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). Choose the applicable table that applies to your situation.
Uniform Lifetime (Table III) is only used for lifetime required distributions. Most IRA owners will use this table, but there is one exception. If your spouse is the sole beneficiary for the entire year and is more than 10 years younger, then you would use your actual ages based upon the Joint and Last Survivor Table.
The Joint and Last Survivor (Table II) is used if your spouse is the sole beneficiary and your spouse is more than 10 years younger than you.
Single Life Expectancy (Table I) is used if you are the beneficiary of an inherited IRA.
Is there a penalty if I fail to take my RMD by the RBD?
There is a 25% excess accumulation penalty tax on amounts that should have been distributed but were not.
Inherited IRA Rules:
Distribution requirements for an inherited IRA are dependent upon whether the deceased owner passed away before or after their RBD and if the owner died prior to January 1, 2020.
Beneficiary Options When Death Occurred Prior to January 1, 2020
Traditional IRA
| Death Occurs Before RBD | Death Occurs After RBD |
|---|---|
|
Spouse is sole beneficiary:
|
Spouse is the sole beneficiary:
|
|
Spouse is not sole beneficiary or non-spouse beneficiary:
|
Spouse is not sole beneficiary or non-spouse beneficiary:
|
|
Non-person beneficiary:
|
Non-person beneficiary:
|
Roth IRA
| Death Occurs Before RBD | Death Occurs After RBD |
|---|---|
|
Spouse is sole beneficiary:
|
Non-person beneficiary:
|
|
Spouse is not sole beneficiary or non-spouse beneficiary:
|
|
Beneficiary Options When Death Occurred After January 1, 2020
Traditional IRA
| Death Occurs Before RBD | Death Occurs After RBD |
|---|---|
|
Eligible designated beneficiary spouse:
|
Eligible designated beneficiary spouse:
|
|
Eligible designated beneficiary non-spouse:
|
Eligible designated beneficiary non-spouse:
|
|
Designated beneficiary person:
|
Designated beneficiary person:
|
|
Designated beneficiary non-person:
|
Designated beneficiary non-person:
|
* July of 2024, the IRS ruled that beneficiaries of IRA owners who died after the RBD will be required to take an RMD based on their life expectancy in years 1 through 9, beginning in 2025. This RMD requirement was waived for the years 2021 through 2024. The RMD is calculated using the Single Life Expectancy (Table 1) and subtracting 1 from the Life expectancy each year.
Example RMD calculation for year 2025: The original IRA holder died on 7/1/2020, was subject to RMDs (death occurred after RBD) and the beneficiary was the IRA holder’s child. Beneficiary is subject to the 10-year rule and opted not to take distributions in the years 2021 through 2024. Child’s age in the year following the IRA holder’s death was 43 and the balance in the Inherited IRA on 12/31/2024 is $535,000. RMD is calculated by determining the beneficiary’s age in the year following the year of the IRA owner’s death, finding the divisor on the Single Life Expectancy Table and subtracting 4 from the divisor (subtract 1 for each subsequent year after the year of death up to 2025) and then dividing by the 12/31/2024 balance. In this case the RMD = $13,753.21 (535,000/38.9 (Age 43 life expectancy 42.9 -4)). You will subtract 1 from all future years up to year 9, since the entire balance needs to be distributed in year 10. 2026 you will use 37.9; 2027 36.9, etc.
Roth IRA
| Death Occurs Before RBD | Death Occurs After RBD |
|---|---|
|
Eligible designated beneficiary spouse:
|
Designated beneficiary person:
|
|
Eligible designated beneficiary non-spouse:
|
Designated beneficiary non-person:
|
We're here to help!
RMDs are complicated. Waukesha State Bank Wealth Management is here to help. Contact us at WealthManagement@waukeshabank.com or (262) 522-7400.