This years record stock market run means more money will be withdrawn and taxed
of ConsumerAffairs
Americans over the age of 73 with tax-deferred retirement accounts need to be thinking about next years required minimum distribution (RMD). Thats the amount of money the government requires you to withdraw each year, which is taxed as ordinary income.
Both traditional individual retirement accounts (IRA) and employee-sponsored 401(k) accounts are subject to RMDs.
Your RMD in 2025 may be significantly more than in recent years. Because of the stock markets record performance this year, the RMD is likely to be higher. Each year the RMD is based on a percentage of the accounts value at the end of the year.
The enactment of the Secure 2.0 Act in 2023 raised the age for RMDs from 72 to 73. According to an estimate from Fidelity Investments, the U.S. Treasury could receive a record $25 billion in RMDs next year.
What to know
Here are some things that retirement account-holders should keep in mind:
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The money you receive in a RMD is taxed as ordinary income. Capital gains do not make a difference.
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Failure to make a RMD will resent in a penalty, as much as 25% of the RMD.
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RMDs must be taken by December 31 of each year after the age of 73.
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You dont receive RMDs from Roth IRAs since the deposits were not tax deductible.
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You can withdraw more than the RMD, but you must pay taxes on whatever you withdraw in a calendar year.
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Most financial institutions holding retirement accounts will inform account owners of the amount of their RMD in January
According to the IRS, account owners in a workplace retirement plan can delay taking their RMDs until the year they retire, unless they're a 5% owner of the business sponsoring the plan.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-10-07 00:06:09
