global Tax November 16, 2021 Turning 72 in 2022? Happy Birthday! Time to take your first required minimum distribution (RMD) from your retirement accounts. We have the details here. If you’re turning 72 in 2022, you’ll want to be aware of your RMD requirements. Due to changes under the Setting Every Community Up for Retirement Enhancement (SECURE) Act, if your 70th birthday is July 1, 2019 or later,
you do not have to take withdrawals until you turn 72. Let’s dive into your requirements. What is an RMD? Your required minimum distribution is the minimum amount you must withdraw from your account each year. This applies to Individual Retirement Accounts (IRAs), SIMPLE IRAs, and SEP IRAs,. Roth IRAs do not require withdrawals until after the death of the account owner. Some things of note: More about the 72 age requirement The SECURE Act changed the age requirement from 70 ½ to 72, meaning anyone whose birthday falls on or after July 1, 2019 has until age 72 to take his/her first RMD. If this applies to you, you have as late as April 1 of the year following the year you turn 72 to take your first RMD. For each year thereafter, the RMD must be made annually by December 31st. If you delay your first RMD until the following year [and prior to April 1], you will need to take two RMDs in that year. For example, you turn 72 in June of 2022. You may delay your first RMD to March 31, 2023, however, you will need to take a second RMD by 12/31/2023. How do you calculate your RMD? Annually the required minimum distribution is calculated by dividing the IRA balance as of December 31st of the preceding calendar year by the applicable life expectancy factor from the IRS tables. A separate table is used if the sole beneficiary is the owner’s spouse who is ten or more years younger than the account owner. You can find the tables here- https://www.irs.gov/retirement... 
IRA trustees are required to report the required distribution amount to IRA owners, or to calculate it for the owners on request, by January 31st of the year the distribution is required. However, as the required minimum distribution can be withdrawn from whichever IRA you choose, you are responsible for ensuring the proper amount is timely received. You could be hit with a 50% penalty tax if you don't withdraw the required minimum amounts each year. It is your responsibility to take the RMD, not the Trustees’. If you have multiple retirement accounts, you need to add them all up to calculate the proper RMD. However, you can select which account(s) you wish to take the money from as long as the total distributions equal or exceed the RMD. Any other requirements? Annual distributions are also required to be made from your employer's qualified plan. These include 401(k), 403(b), 457(b) and profit-sharing plans. Generally, the plan administrator is responsible for calculating and timely paying the RMD amount from qualified retirement plans. If you are still working for the employer and do not own more than 5% of the company stock, you can delay your RMD until retirement. Happy Birthday! Don’t forget to take your RMD as you will face substantial penalties for noncompliance. Questions? Don’t hesitate to contact us. Stay informed. Get all the latest news delivered straight to your inbox.Also in Tax BlogWhat's the best time to take required minimum distributions? Can you reinvest RMDs or take ... [+] withdrawals without paying tax? gettyPlanning can help optimize annual RMDs depending on your goals and cash flow needs. Mandatory withdrawals from retirement accounts begin for most taxpayers at age 72. But retirees who don't need the money often have questions. For example, what's the best time of year to take required minimum distributions, how to reinvest it, or if you can avoid paying tax on RMDs. Here are some of the most common RMD questions and planning opportunities for investors. And while there isn't just one best way for everyone to take required minimum distributions, there's probably one way that works best for you. At least this year. What's the best time of year to take your RMD? Lump sum or monthly?All else equal, (though it rarely is), it's often best to stay invested as long as possible to prolong tax-deferred growth. Of course, this assumes several key factors: the market is going up, you don't need the money, and there aren't any tax savings in considering alternate approaches (more on this later). Trying to market time your RMD on a daily basis is sure to be met with mixed results. To illustrate: between 1980 and 2021, the S&P 500 closed a dailytrading session with a positive price return only 54% of the time. But over a full year, the S&P 500 ended the yearwith a positive price return over 75% of the time. Given that statistic, retirees without cash flow needs could benefit, on average over the long run, from staying invested and taking withdrawals closer to year end. If you need the money from your retirement accounts to meet cash flow needs, there's less room for optimization. Taking RMDs monthly, quarterly, or semi-annually is possible, though you'll want to consider trading costs relative to the size of the distribution. Further, if you're not working with a financial advisor, consider your appetite for frequent trading. How to take RMDs and avoid any taxes (legally of course)Retirees can donate all, or a portion of, their required minimum distribution directly to charity to legally avoid paying tax on the gifted amount. It’s called a qualified charitable distribution (QCD). You can make QCDs starting at age 70 1/2. The maximum gift is the lesser of your RMD or $100,000/year per taxpayer. Usually, to benefit from charitable giving, taxpayers need to itemize their tax deductions. But with a qualified charitable distribution, the money is simply excluded from your taxable income for the year, similar to a 401(k) contribution. Like any tax planning strategy involving charitable giving, you must be charitably inclined for it to make sense. Can you reinvest your required minimum distribution?Yes, you can reinvest your RMD. There are a couple ways to do it. The easiest way is often selling investments in a retirement account and transferring cash to a taxable brokerage account. Investors typically wish to do some tax withholding at this stage and move the net amount, but if you have enough cash set aside already it isn't necessary. Another method that tends to works best for large required minimum distributions is transfer shares in-kind from your retirement account to a brokerage account. Particularly in a down market, this approach can be beneficial for investors who don't need the money right now. Some shares can be sold for tax withholding if necessary. This method may require some paperwork depending on the financial institution. Also, as markets move daily, the actual value of the investments transferred may be higher or lower than your RMD, the latter requiring an additional transfer or distribution. Although you cannot reinvest your RMD directly in an IRA or a Roth IRA, if you have earnedincome for the year, you may still be able to contribute to one of these accounts. Should you delay distributions from retirement accounts as long as possible?To simplify, RMD age is often referred to as beginning the year you turn 72. But technically, taxpayers have until April 1 of the year afterthey turn 72 to take their first distribution. If you defer, you'll need to take two required minimum distributions the year you turn 73. For example, if you turn 72 in 2022, your 2022 RMD is calculated using your retirement account balance on 12/31/2021, divided by the Life Expectancy Factor from the IRS Uniform Lifetime Table. Your 2023 required distribution is based on your account balance from Dec. 31, 2022. If you don't take your 2022 RMD this year, you have to take both in 2023. In most cases, delaying distributions this way isn't beneficial. For starters, the surge in taxable income at age 73 can put you in a much higher tax bracket and also increase Medicare Part B premiums. Further, it could be a wasted opportunity if you were in lower tax brackets before turning 72. For these reasons, it sometimes makes sense to consider starting RMDs at 72 or even to start taking withdrawals from your retirement accounts beforehand. For example, you might consider taking advantage of low tax brackets by doing a series of Roth conversions before RMDs begin or simply paying tax at low rates to avoid the dreaded tax cliff. However, there are instances where deferring distributions as long as possible is advantageous. Consider a business owner selling a business at retirement or individual experiencing another type of windfall. If you're in the highest marginal tax bracket one year but not the next, there's a potential planning opportunity. Retirement income planningThere are many factors that go into retirement income planning. Unfortunately, most of the best planning opportunities occur before RMD age. The best approach can also change every year. For example, even when markets are down, it won't change your required withdrawals for the current year. However, it's likely your mandatory distribution the next year will be lower. Perhaps this meets your cash flow needs, but perhaps not. In either case, it's a new year to try and optimize your required minimum distributions. Article is for informational purposes only and should not be misinterpreted as personalized advice of any kind or a recommendation for any specific investment product, financial or tax strategy. This is a general communication should not be used as the basis for making any type of tax, financial, legal, or investment decision. What are the RMD rules for 2022?SECURE Act changes to RMD rules. For those who reach age 72 after Dec. 31, 2022 and age 73 before Jan. 1, 2030, the RMD age would be 73.. For those who reach 73 after Dec. 31, 2029 and age 74 before Jan. 1, 2033, the RMD age would be 74.. For those who reach 74 after Dec. 31, 2032, the RMD age would be 75.. What is the required minimum distribution at age 72?RMD Tables. Is it better to take RMD at beginning or end of year?You can take your annual RMD in a lump sum or piecemeal, perhaps in monthly or quarterly payments. Delaying the RMD until year-end, however, gives your money more time to grow tax-deferred. Either way, be sure to withdraw the total amount by the deadline.
Do I have to wait until my birthday to take my RMD?If you're turning 72 in 2022, you'll want to be aware of your RMD requirements. Due to changes under the Setting Every Community Up for Retirement Enhancement (SECURE) Act, if your 70th birthday is July 1, 2019 or later, you do not have to take withdrawals until you turn 72. Let's dive into your requirements.
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When do i have to start rmd
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