RMDs by age: Understanding how distributions change at different ages.
Required Minimum Distributions (RMDs) by Age
When it comes to Required Minimum Distributions (RMDs), it's essential to understand how these distributions change at different ages. RMDs are the minimum amounts that traditional IRA, SEP IRA, SIMPLE IRA, 401(k), and other retirement account owners must withdraw annually once they reach a certain age.
Age 70½
Previously, the age at which RMDs were required to start was 70½. However, as of 2020, the SECURE Act increased the starting age for RMDs to 72 for individuals who turn 70½ after December 31, 2019. For those who turned 70½ before that date, the previous rules still apply.
Age 72
For individuals who reach age 72 in 2024 and beyond, the RMD for each year is calculated by dividing the account balance as of December 31 of the prior year by the distribution period based on the IRS Uniform Lifetime Table.
The Required Minimum Distribution (RMD) percentage for a typical 75-year-old varies depending on their individual circumstances, such as their retirement account balances and life expectancy. Generally, the RMD amount is calculated by dividing the total balance of all your traditional IRAs and retirement plans by a life expectancy factor. For a 75-year-old, the RMD percentage typically falls around 4%-5.56% of their retirement account balance. It is essential for individuals in this age group to consult with financial advisors or use IRS RMD calculators to determine their specific RMD percentage accurately.
Age 85 and Beyond
As individuals get older, the percentage that must be withdrawn each year increases, according to the IRS distribution tables. This means that the RMD amount will continue to rise, requiring account holders to withdraw a larger portion of their retirement savings annually.
Understanding how RMDs change at different ages is crucial for retirement planning and ensuring compliance with IRS regulations. It's recommended to consult with a financial advisor or tax professional to navigate the complexities of RMDs and make informed decisions regarding retirement account distributions.
The Required Minimum Distribution (RMD) percentage for a typical 85-year-old is determined by the IRS based on life expectancy tables. At age 85, the RMD percentage is around 5.35%. This means that individuals who are 85 years old are generally required to withdraw at least 5.35% of their retirement account balance as their annual RMD. It's important for individuals in this age group to calculate their RMD accurately to avoid penalties for not withdrawing the required amount.
The Required Minimum Distribution (RMD) percentage for a typical 95-year-old varies based on the account balance and life expectancy. At age 95, the RMD percentage is usually around 6.6%. It is essential for individuals in this age group to carefully calculate and adhere to their RMD to avoid penalties from the IRS.
-Brian D. Muller, AAMS® Founder, Wealth Advisor
Disclaimer: This article is meant to provide general information only and should not be construed as specific investment, legal, or tax advice. Consult your financial advisor or tax professional regarding your unique situation.