IRS Sends Final Reminder for Retirees to Take 2024 RMDs

The IRS on Tuesday issued a reminder to those aged at least 73 to take their required minimum distributions from defined contribution and individual retirement accounts before the end of the year or face monetary penalties.

Retirement plan and IRA owners must make the annual withdrawal, which is considered taxable income, and may incur penalties if they do not, the IRS warned.

If an account holder does not withdraw the full amount by December 31, the holder is subject to a 25% excise tax on the amount not withdrawn; that 25% excise tax rate is reduced to 10% if the error is corrected within two years. 

The regulator also alerted participants and advisers to RMD changes stemming from the SECURE 2.0 Act of 2022. That legislation raised the age that account owners must begin taking RMDs to 73 from 72 as of 2023, while eliminating RMDs for designated Roth accounts in 401(k) and 403(b) retirement plans. The RMD age will be raised again to age 75 in 2033.

This year, the minimum distribution rules generally apply for account holders and beneficiaries of: 

• Traditional IRAs and IRA-based plans, even if the person is still employed;
• Employer-sponsored plans, with delays allowed until retirement unless the participants own more than 5% of the sponsoring business; and
• Roth IRA beneficiaries after the account owner’s death.

According to the IRS, the correct RMD amount must be provided (or an offer to calculate it must be made) by IRA trustees or plan administrators to the account owner, but the account holder will ultimately be held responsible for getting the amount correct.

Holders of multiple IRAs must calculate the RMD for each separately, but the total amount can be withdrawn from one or more accounts.

The IRS provides required minimum distribution worksheets to help calculate the amounts, as well as other tools and forms related to RMDs, at IRS.gov.