{"id":10041,"date":"2024-03-31T08:07:32","date_gmt":"2024-03-31T12:07:32","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=10041"},"modified":"2024-04-01T06:27:53","modified_gmt":"2024-04-01T10:27:53","slug":"retired-and-taking-your-rmds-heres-what-to-do-now-for-next-years-tax-bill","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=10041","title":{"rendered":"Retired and taking your RMDs? Moves to do for 2024 taxes"},"content":{"rendered":"
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You\u2019ve only just finished preparing your 2023 taxes \u2014 or you’re close to being done. <\/span>Since taxes are top of mind<\/a>, it\u2019s a good idea to start planning for next year\u2019s return.<\/span><\/div>\n<\/div>\n
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How you manage your retirement accounts in 2024 will have a direct impact on the tax bill you\u2019ll face next April.<\/p>\n

A\u00a0surge in retirement account balances last year<\/a>\u00a0has started to roll out for retirees who are already taking their required minimum distributions (RMDs) from IRAs and workplace plans. Your RMD is generally taxed as ordinary income in the year it\u2019s taken, so the taxes on that money will come due next April.<\/p>\n

\u201cThe year-end retirement account balance, though, is key to retirees because their required minimum distribution is based on that balance,\u201d Ed Slott,\u00a0a certified public accountant<\/a>\u00a0in New York and an expert on IRAs, told Yahoo Finance. \u201cSo the first thing they’re going to see is larger RMDs this year.\u201d<\/p>\n

Read on Yahoo Finance<\/a><\/strong><\/p>\n

While more income via bigger RMDs sounds like good news, it\u2019s vital that you manage those withdrawals wisely so you don\u2019t get a surprise at tax time.<\/p>\n

Here are a few moves you can make to stay ahead of the game.<\/p>\n

Read more:\u00a0<\/em>3 ways retirees can save on taxes<\/em><\/a><\/p>\n

Nuts and bolts of RMDs<\/strong><\/h2>\n

The amount you are required to withdraw<\/a>\u00a0is calculated by dividing your tax-deferred retirement account balance as of Dec. 31 of the preceding year by a life expectancy factor that corresponds with your age in the IRS Uniform Lifetime Table.<\/p>\n

As your life expectancy declines, the percentage of your assets that must be withdrawn ramps up. Of course, you can withdraw more than required, but that distribution in excess doesn\u2019t count toward your required amount for future years. More on that shortly.<\/p>\n

If you have multiple retirement accounts, you\u2019ll need to suss out your RMD for each one individually.<\/p>\n

One exception that may let you delay your RMD from an employer-sponsored 401(k) or (403(b) plan is to stay on the job.<\/p>\n

Getting help with RMD calculations<\/strong><\/h2>\n

A tax professional can help you figure out the amount you must take annually, or you can use an online calculator such as\u00a0the one AARP provides<\/a>\u00a0or\u00a0the one Fidelity has<\/a>\u00a0on its website. The IRS also provides\u00a0worksheets<\/a>.<\/p>\n

Most financial services firms will calculate your RMD for you, which can streamline the process for you.<\/p>\n

Typically, your provider will alert you in January about what your required amount will be for the coming year, and you can choose to have your withdrawals stretched out over the year. Say, for example, you have a $40,000 mandatory distribution for 2024, you could schedule a monthly withdrawal of roughly $3,333.<\/p>\n

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It\u2019s generally a good idea to automate your withdrawal so you avoid the penalties of forgetting to take it or miscalculating the amount required for you to take.<\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n

Under\u00a0a new law<\/a>, starting this filing season, seniors who fail to take the required minimum distribution will pay a penalty of 25% on the amount. But if you correct your mistake usually within two years, the penalty could be reduced to 10%.<\/p>\n

The penalty may also be waived entirely if you can make the case that the mistake in distribution was not your intention and you\u2019ve taken action to correct it.<\/p>\n

Some plan providers and custodians allow you to set up automatic withdrawals, based on the same criteria of age and year-end account balances, with the proper amounts calculated and then withdrawn and sent to you by check or direct deposit on the date you select.<\/span><\/p>\n