The IRS is waiving 2024 RMDs for IRA beneficiaries under the 10-year Rule. For the fourth consecutive year, the IRS is saying, “Don’t worry about taking your RMD.” This may seem like a relief but consider this: If you take your RMD in 2024, that income will be taxed at the current, lower rate. Delaying until after 2025 may mean potentially higher tax brackets and a larger tax bill.

The decision to take your RMD this year depends on your individual circumstances. Think about:

• Your current tax bracket. If you're already in a low tax bracket, taking the RMD now could lock in a more favorable tax treatment.
• Your projected future tax bracket. If you expect to be in a lower tax bracket in the future, delaying the RMD could be advantageous.
• Your need for current income. If you rely on the RMD for living expenses, taking it now might be necessary.

The age at which RMDs begin depends on the current tax year. In 2024 and beyond, the starting age is 73. There's a slight twist for the first RMD. You have until April 1 of the year after you turn 73 to take your first withdrawal. This is known as your "Required Beginning Date" (RBD). Subsequent RMDs must be withdrawn by December 31 of each year.

RMDs apply to most traditional retirement accounts where taxes are deferred on contributions. This includes:

• Traditional IRAs
• SEP IRAs
• Simple IRAs
• Rollover IRAs (from traditional accounts)
• Most employer-sponsored retirement plans, including 401(k)s

Roth IRAs, on the other hand, are funded with after-tax dollars, so RMDs don't apply. However, beneficiaries of a Roth IRA are subject to the RMD rules.

The IRS provides a formula to calculate your RMD. It considers two factors:

• Your account balance at the end of the prior year.
• Your life expectancy, based on an IRS table (determined by your age).

The higher your account balance and the older you are, the larger your RMD will be. There are online RMD calculators available, however, we’re here to help calculate based on your specific situation.

Missing your RMD deadline comes with a hefty penalty - If you fail to withdraw the full amount of the RMD by the due date, the amount not withdrawn is subject to a 50% excise tax. SECURE 2.0 Act drops the excise tax rate to 25%; possibly 10% if the RMD is timely corrected within two years. It's crucial to understand the deadlines and withdraw the required amount by the due date.

While RMDs ensure you use your retirement savings, they can also push you into a higher tax bracket. Here are a few strategies to consider:

• If you have multiple retirement accounts, you may want to withdraw from the ones with the highest taxable amounts first.
• If you're over 70 ½, you can donate up to $100,000 directly from your IRA to charity using a Qualified Charitable Distribution (QCD), which can reduce your taxable income.
• Converting some of your traditional IRA to a Roth IRA can help minimize future RMD tax burdens, though there may be tax implications during the conversion year.

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