2026 RMD Requirements and Updates

Demystifying RMDs: What You Need to Know About Required Minimum Distributions

What are RMDs?

Think of RMDs as the minimum annual "must-withdraw" amount from your retirement accounts like traditional IRAs, SEP IRAs, 401(k)s, and more. RMDs are required by the IRS at a certain age, as you've previously had the benefits of tax-deferred growth, and must now pay taxes on it. 

When do RMDs start?

As of January 1, 2023, the RMD starting age is 73, increasing to 75 in 2033. So, if you turned 73 in 2023 or later, your first RMD is due by December 31st of the following year.

RMDs must be taken if you are the original account holder or the beneficiary of the following: a traditional IRA, SEP IRA, SIMPLE IRA, 401k, 403b, 457b, profit sharing plan, other defined contribution plan, or are a Roth IRA beneficiary. However, Roth IRAs owned by the original account holder are exempt from RMDs, making them a great strategy to minimize future RMD burdens.

How are RMDs calculated?

Your RMD will change every year, it's not a flat amount. Your RMD amount depends on:

Account balance: Your account value as of December 31st of the previous year.
Life expectancy: Based on your age and a table provided by the IRS.

The IRS offers calculators on their website to help you estimate your RMD. Those can be found here - https://www.irs.gov/retirement-plans/plan-participant-employee/required-minimum-distribution-worksheets

What happens if I don't take my RMD? 

Missing an RMD comes with a 25% penalty on the untaken amount. However, the IRS might reduce the penalty to 10% if you correct the mistake promptly.

Taking control of your RMDs:

• Spread it out: You can take the RMD in multiple withdrawals throughout the year, not just one lump sum. If you are taking income from eligible retirement accounts, it will count towards your RMD total for the year. 
• Consider Roth Conversions: If eligible, converting traditional IRAs to Roth IRAs can offer tax benefits in the long run and lower or eliminate future RMDs for the original account holder.
• Qualified Charitable Distribution: Charitable gifting can be done from your RMD-eligible retirement account and counts towards your RMD total. If the contribution is made directly to a qualified charitable organization, it is non-taxable. 

We understand that RMDs can be confusing. At InVision Investment Group, we stay up-to-date on retirement regulations and diligently review our clients' accounts to ensure timely RMD compliance. If you have any questions or concerns about your RMD, don't hesitate to contact us. We're here to walk you through every step.

Neither LPL Financial, nor its registered representatives, offer tax or legal advice. Always consult a qualified tax advisor for information as to how taxes may affect your particular situation.