IRS urges many retirees to make required withdrawals from retirement plans by year-end deadline 

WASHINGTON — The Internal Revenue Service today reminded those aged 73 and older of the deadline to take Required Minimum Distributions from Individual Retirement Arrangements (IRAs) and other retirement plans, and highlighted updates introduced by the SECURE 2.0 Act. 

Required Minimum Distributions (RMDs) are amounts that many retirement plan and IRA account owners must withdraw annually. These withdrawals are considered taxable income and may incur penalties if not taken on time. The IRS.gov Retirement Plan and IRA Required Minimum Distributions FAQs webpage provides detailed information regarding the new provisions in the law. 

SECURE 2.0 Act: The new law raised the age that account owners must begin taking RMDs, while eliminating RMDs for Designated Roth accounts in 401(k) and 403(b) retirement plans. 

The minimum distribution rules generally apply to original account holders and their beneficiaries in these types of plans: 

• IRAs: IRA withdrawals from traditional IRAs and IRA-based plans occur every year once people reach age 73, even if they’re still employed.

• Retirement plans: The RMD rules apply to employer-sponsored plans, with delays allowed until retirement unless the participants own more than 5% of the sponsoring business.

• Roth IRAs: Roth IRA owners are not required to take withdrawals during their lifetime, however beneficiaries are subject to the RMD rules after the account owner’s death.  

Designated Roth accounts in a 401(k) or 403(b) plan will not be subject to the RMD rules while the account owner is still alive for 2024. The RMD Comparison Chart outlines key RMD rules for IRAs and defined contribution plans. 

Penalties for missed distributions

If an account owner fails to withdraw the full amount of the RMD by the due date, the owner is subject to a 25% excise tax on the amount not withdrawn. The 25% excise tax rate is reduced to 10% if the error is corrected within two years.