Key Takeaways The end of the year is near and you might be busy stocking up on gifts and planning visits to family and friends. But retirees should keep another year-end deadline in mind: taking required minimum distributions, or RMDs. New research from Vanguard estimates that missed RMDs could cost retirees up to $1.7 billion annually. Starting at age 73, investors must take RMDs, which are required annual withdrawals from accounts like 401(k)s and traditional IRAs. (Though if you're still working and have ...

SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. I’m 77 years old and I requested my 401(k) fund administrator to prepare my RMD. I was told I do not have to withdraw my money if I am still employed. Please confirm if this in fact an IRS rule or that of the fund management company? -Bea That is correct, Bea. If you are still employed, you do not have to take a required minimum distribution (RMD) from your current 401(k) regardless of your age, as long ...

Core Insights - Navigating inherited retirement accounts can be complex and stressful, especially after the death of a loved one, but understanding options can help avoid significant tax liabilities [1] Summary by Sections Inherited IRA Complexity - Inherited IRAs can be complicated, and beneficiaries like Becka may need to consult financial advisors or tax professionals before making decisions [2] Updated Rules for Inherited IRAs - The SECURE Act 1.0 and 2.0 introduced new rules for IRA distributions for accounts where the owner passed away in 2020 or later, eliminating the "stretch" IRA for many non-spouse beneficiaries, requiring them to empty the account within 10 years [3] Distribution Timeline - The 10-year period for emptying the account starts on December 31 of the year following the original account owner's death, meaning Becka must empty her inherited IRA by December 31, 2032, if her mother passed away in 2022 [4] Required Minimum Distributions (RMDs) - If the original account owner had been taking RMDs, Becka must also take annual RMDs as a non-spousal beneficiary, with penalties for missing these distributions [5] Penalties for Non-Compliance - Any remaining balance in the account after the 10-year period will incur a 50% penalty, emphasizing the importance of timely withdrawals [6] Options for Beneficiaries - Different options exist for various types of beneficiaries, including surviving spouses, adult children, minor children, or entities like trusts, affecting how they manage inherited accounts [6]

Core Points - The article discusses the rules and strategies surrounding Required Minimum Distributions (RMDs) from pre-tax retirement accounts, emphasizing the importance of compliance to avoid penalties [4][25]. - It outlines methods to potentially reduce the tax impact of RMDs through strategies like Qualified Charitable Distributions and Roth conversions [12][15]. RMD Rules - RMDs apply to pre-tax retirement portfolios such as 401(k), 403(b), and traditional IRAs, with no RMDs required for taxed portfolios or Roth accounts [4][25]. - Starting at age 73, individuals must withdraw a minimum amount from each applicable pre-tax portfolio by the end of the year [3][4]. - The RMD amount is calculated based on the account balance at the end of the previous year divided by a distribution period set by the IRS [8][9]. Tax Implications - Failure to take the minimum distribution results in a 50% excise tax on the amount not withdrawn [1][6]. - Withdrawals from pre-tax portfolios are subject to income taxes, which is the primary reason for the RMD requirement [2][6]. Strategies to Manage RMDs - **Qualified Charitable Distribution (QCD)**: Allows individuals to transfer funds directly to charity, which counts towards the RMD and is not taxable [13][14]. - **Roth Conversion**: Converting pre-tax assets to a Roth IRA eliminates future RMD requirements on the converted amount, though taxes must be paid on the conversion [15][18]. - **Withdrawal Structuring**: Taking income from pre-tax portfolios first can reduce the value subject to RMDs, allowing other assets to grow [20][21]. - **Investing in Annuities**: Income generated from annuities can satisfy RMD requirements, providing a potential strategy to manage distributions [22][23]. Conclusion - RMDs are mandatory withdrawals from pre-tax retirement accounts, and while current year obligations cannot be reduced, future RMDs can be managed through strategic planning [25][28].

Missing this deadline could result in easily avoidable penalties.The end of the year usually brings many deadlines, especially those related to personal finances. One of the deadlines approaching is the required minimum distribution (RMD) that applies to people with tax-deferred retirement accounts like a 401(k) or traditional IRA.Beginning when you turn 73, RMDs are a way for the IRS to collect taxes on the back end after providing you with an upfront tax break that allowed you to lower your taxable income ...

Hey everyone, welcome to FidQs, the place where we answer your top Fidelity customer questions as quickly and simply as humanly possible. Today's question is. how do I take an RMD, or required minimum distribution from my Fidelity IRA. from my Fidelity IRA.I know, I know. Those were some rapid fire acronyms. Let me spell things out for you PDQ.And once you take out your RMD, know you can spend it, invest it, or gift it to a loved one. Here's where things get a little tricky though. Let's say you're turning ...

Core Insights - The article emphasizes the importance of getting financial affairs in order as 2025 comes to a close, particularly for retirees who need to consider their required minimum distributions (RMDs) before 2026 begins [1] Required Minimum Distributions (RMDs) - Individuals aged 73 or older with traditional retirement accounts must take RMDs, as mandated by the IRS to prevent tax-advantaged wealth transfer [3] - The first RMD is due by April 1 of the year following the individual’s 73rd birthday, while subsequent RMDs must be taken by December 31 of each year [4] - Failure to take the required distribution can result in a 25% penalty on the amount that should have been withdrawn, which may be reduced to 10% if corrected promptly [4] Calculating RMDs - RMDs are calculated based on the account balance and life expectancy, with financial institutions typically providing this calculation [5] Managing RMDs - For retirees who do not need their RMDs, these distributions can create an immediate tax burden [6] - One strategy for managing RMDs is to utilize a qualified charitable distribution (QCD), which allows funds to be transferred directly to a charity, satisfying the RMD requirement while excluding the amount from taxable income [7] - Alternatively, retirees can take their RMD and reinvest it in a traditional brokerage account or other investment vehicles, although taxes will still apply to the distribution [8]

Core Insights - The article emphasizes the importance of taking Required Minimum Distributions (RMDs) early to secure higher yields before potential interest rate cuts by the Federal Reserve [2][3][6]. RMD Timing and Strategy - Individuals subject to RMDs must withdraw by December 31 to avoid penalties, and while many wait until December, acting sooner may be beneficial [2][3]. - With anticipated Federal Reserve interest rate cuts, delaying RMD withdrawals could result in missed opportunities to lock in current high yields, particularly in certificates of deposit (CDs) [3][9]. Investment Options for RMD Funds - Taking RMDs early allows individuals to invest in high-yield CDs, which currently offer returns in the low- to mid-4% range, providing a safe and predictable return [8][10]. - For those seeking flexibility, high-yield savings accounts and money market accounts are also viable options, with some accounts offering rates up to 5.00% [12][13]. Market Conditions and Predictions - The probability of a Federal Reserve rate cut is approximately 45% in December and around two-thirds by late January, which could lead to declining CD yields [9]. - The article suggests that locking in current CD rates is prudent, as there is no guarantee that these rates will remain available until the RMD deadline [10].

Core Points - Traditional IRAs and 401(k) plans allow investment of pre-tax dollars, with tax liabilities deferred until withdrawals are made in retirement [1] - Required Minimum Distributions (RMDs) are mandatory withdrawals from tax-deferred retirement accounts, which must begin at a certain age [2] Summary by Sections RMD Changes - The Secure 2.0 Act increased the age for starting RMDs from 72 to 73 for individuals born on or after January 1, 1951 [4] - The age thresholds for RMDs are as follows: - Before July 1, 1949: 70 1/2 - July 1, 1949, to December 31, 1950: 72 - January 1, 1951, to December 31, 1959: 73 - After December 31, 1959: 75 [5] RMD Compliance - RMDs must be completed by December 31 each year, with the first RMD allowed to be delayed until April 1 of the following year [6] - Failure to withdraw the required amount incurs a penalty of 25% of the amount not withdrawn, although this penalty can be reduced [6]

Group 1 - A significant number of retirement savings accounts, specifically 401(k)s, are left behind or forgotten, with 31.9 million such accounts reported as of July 2025, averaging a balance of $66,691 [1] - Forgotten accounts often result from job changes, but other types of retirement accounts, like IRAs, can also be lost or overlooked [2] - The ability to claim an inherited IRA depends on the original beneficiary designation, account title, and compliance with tax rules and required distributions [2][3] Group 2 - Inherited IRAs are passed to the named beneficiary, with surviving spouses having the most flexibility in managing the account, including rolling it into their own IRA [3] - If no beneficiary is named, the IRA becomes part of the decedent's estate and is distributed according to the will or state intestacy laws, requiring adherence to IRS rules for non-spouse beneficiaries [3] - Non-spouse beneficiaries are generally subject to the 10-year rule under the SECURE Act, necessitating the account to be emptied within ten years of the original owner's death [3]