Has the Required Minimum Distribution (RMD) Age Increased to 73?

As of January 1, 2023, the age for taking annual Required Minimum Distributions (RMDs) has increased from 72 to 73 for individuals born after December 31, 1950, and before January 1, 1960. However, it is important to note that this age will increase again in 2033 to age 75, providing even more flexibility for retirement planning.

For those individuals turning age 72 in 2023, they will not have to begin taking RMDs from their IRA until 2024 when they reach age 73. Therefore, a person's first RMD is due for the year they turn 73, in 2024. There is no RMD for 2023. Thus, the deadline for taking your first (initial) RMD would be April 1, 2025.

For those born before December 31, 1950, the RMD is based on the amount of money in their retirement accounts as of December 31 of the previous year and their life expectancy. The IRS provides tables that can be used to calculate the RMD based on an individual's age.

It is important to note that the deadline for taking a first RMD is always April 1st of the year after you reach RMD age, with all subsequent RMDs due by December 31st of each year. This means that if you turn 73 in 2024, your first RMD will be due by April 1, 2025, and subsequent RMDs will be due by December 31st of each year.

A good tip to avoid double tax in your first year is to take your first RMD in the year before your April deadline. For example, if you turn 73 in 2024, you can choose to take your first RMD in 2023 instead of waiting until April 1, 2025. By doing this, you can avoid having to take two RMDs in the same year, which could push you into a higher tax bracket and result in a larger tax bill.

Let's look at an example to make this more clear. Susan was born on July 1, 1956, which means she will turn 73 in 2029. Her first RMD will be due by April 1, 2030. However, she decides to take her first RMD in 2029 instead, to avoid having to take two RMDs in the same year. She has $500,000 in her retirement account as of December 31, 2028, and her life expectancy is 25 years. Based on the IRS tables, her RMD for 2029 would be $20,000 ($500,000 divided by 25). By taking this RMD in 2029, she will avoid having to take another RMD in 2030 and potentially pay more in taxes.

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