When Do You Take Your First RMD If Born in 1951?
Gain clarity on your retirement RMDs. Discover crucial timing and distribution rules for sound financial planning.
Required Minimum Distributions (RMDs) represent mandatory annual withdrawals from tax-deferred retirement accounts. These distributions ensure that the government eventually collects tax revenue on savings that have grown tax-free for many years. Understanding these rules is an important aspect of managing retirement finances and avoiding potential penalties.
Understanding Required Minimum Distributions
Required Minimum Distributions apply to various tax-advantaged retirement plans, including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, and 457(b) plans. Funds within these accounts typically grow tax-deferred, meaning taxes are not paid on contributions or earnings until withdrawal. Roth IRAs are a notable exception for the original owner.
RMD Start Date Based on Birth Year
Legislative changes have altered the age at which individuals must begin taking RMDs. The SECURE Act increased the RMD age from 70½ to 72, and the SECURE 2.0 Act further adjusted this age based on birth year.
For those born between 1951 and 1959, the RMD age is 73. If you were born in 1951, your first RMD must be taken by April 1 of the year following the year you turn 73. For example, if you turned 73 in 2024, your first RMD is due by April 1, 2025.
Subsequent RMDs must be taken by December 31 of each calendar year. Choosing to delay your initial RMD means you will take two distributions in that subsequent year: your first RMD by April 1, and your second RMD for that year by December 31. This can potentially increase your taxable income for that year.
Calculating Your RMD Amount
Calculating your RMD involves a straightforward process based on your account balance and life expectancy. The required amount is determined by dividing your retirement account balance as of December 31 of the previous year by a life expectancy factor. This factor is obtained from tables published by the IRS.
Most individuals use the Uniform Lifetime Table provided by the IRS to find their specific life expectancy factor. For instance, a 73-year-old would use a factor of 26.5 from this table. If an account held $100,000 on December 31 of the prior year, the RMD would be $100,000 divided by 26.5, equaling approximately $3,773.58.
It is important to calculate the RMD for each of your IRAs separately. However, you can then withdraw the total RMD amount from one or a combination of your IRA accounts. For employer-sponsored plans like 401(k)s and 457(b)s, RMDs must typically be taken separately from each plan account.
What Happens If You Don’t Take Your RMD
Failing to take a timely RMD can result in significant financial consequences. The IRS imposes an excise tax on any amount not withdrawn as required. This penalty is generally 25% of the amount that should have been distributed.
The penalty may be reduced to 10% if the missed RMD is corrected promptly within a specific timeframe. To request a waiver of the penalty, individuals must file IRS Form 5329, “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts,” along with a letter of explanation. The waiver may be granted if the failure was due to reasonable error and steps are taken to remedy the shortfall.
Certain exceptions allow for delaying RMDs. For instance, if you are still working for the employer sponsoring your 401(k) plan and are not a 5% owner of the business, you may be able to delay RMDs from that specific plan until you retire.