Can I Avoid Taking My RMD After Reaching My Required Beginning Date (RBD)?
Once you reach your RBD, which is generally April 1st following the year in which you turn 73 (or 70 ½ if you turned 70 ½ before January 1, 2020), you are required to take RMDs from your traditional IRA, SIMPLE IRA, SEP IRA, and 401(k) accounts.
If you forget to take an RMD, you may be subject to a 25% penalty on the amount that you were supposed to withdraw. However, the IRS may waive this penalty if you can show that the failure to take the RMD was due to reasonable error and that you have taken steps to remedy the situation.
The RMD amount is calculated based on your account balance at the end of the previous year and your life expectancy, as determined by IRS tables.
If you have multiple retirement accounts, you can calculate your total RMD amount and take it from any one or a combination of your accounts. However, RMDs from 401(k)s cannot be combined with RMDs from traditional IRAs, SIMPLE IRAs, or SEP IRAs.
If you are still working and participating in a 401(k) plan, you may be able to delay taking RMDs from that plan until you retire. However, this exception only applies if you own less than 5% of the company sponsoring the plan.
Overall, RMD rules can be complex and depend on many factors, so it's important to consult with a financial advisor or tax professional for personalized guidance.
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Robert J. Pyle, CFP®, CFA, AEP® founded Diversified Asset Management, Inc., in 1996 to provide personalized, comprehensive wealth management services to successful individuals, families, single women, and business owners. His specialty is addressing the complex financial needs of self-employed professionals, corporate executives, and small-business owners. Our disclosure can be found here. The views, opinion, information, and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting, or tax advice.