Required minimum distributions: 73 or 75, and what the first year looks like
The age depends on the year you were born. The first distribution has a deadline that can put two of them in one tax year if you wait.
By Elias Tranter
5 min read
Traditional IRAs and most workplace retirement plans require you to start taking money out at a certain age. Under current law that age is 73 if you were born between 1951 and 1959, and 75 if you were born in 1960 or later.
How the amount is set
Each year’s required amount is the account balance on December 31 of the previous year divided by a factor from the IRS life expectancy table. The factor shrinks as you age, so the required percentage rises over time.
The first-year trap
Your first distribution can wait until April 1 of the year after you reach the required age. Every later one is due by December 31. If you use the April delay, you take two distributions in the same tax year, which can push you into a higher bracket.
Ways to shape the bill
Roth conversions in earlier years reduce the balance that distributions are based on. From 70½, qualified charitable distributions count toward the requirement without adding to taxable income. And if you are still working, many 401(k) plans let you delay distributions from that plan until you retire.
Missing one
The penalty for a missed distribution is 25% of the shortfall, reduced to 10% if corrected in time. We schedule every client’s distributions in January and confirm each one is complete by early December.
Questions about your own plan, a rollover or a beneficiary form? An advisor reads every message.
