Required Minimum Distributions (RMDs)

Required Minimum Distributions (RMDs) are the minimum amounts that retirement account owners must withdraw annually from tax-deferred accounts once they reach a certain age. The SECURE Act 2.0 (enacted December 2022) made significant changes to RMD rules that are tested on the EA exam.

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RMD Age Requirements Under SECURE Act 2.0

The RMD starting age depends on your birth year:

Note: The IRS clarified that individuals born in 1959 have an RMD age of 73 (not 75), resolving earlier ambiguity in the statute.

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Required Beginning Date (RBD)

The Required Beginning Date (RBD) is the deadline for taking your first RMD:

RBD = April 1 of the year FOLLOWING the year you reach RMD age

Examples:

• Born January 15, 1951: Turns 73 in 2024 → First RMD due by April 1, 2025
• Born December 20, 1960: Turns 75 in 2035 → First RMD due by April 1, 2036

The First-Year "Double RMD" Trap

If you delay your first RMD to April 1 of the following year, you must still take your second RMD by December 31 of that same year, resulting in two RMDs in one tax year:

EA Exam Tip: This "double RMD" year can push a taxpayer into a higher tax bracket. The exam may test whether delaying the first RMD is advantageous.

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Accounts Subject to RMDs

RMDs are REQUIRED from these accounts:

• Traditional IRA
• SEP-IRA
• SIMPLE IRA
• 401(k) (pre-tax and Roth—see exception below)
• 403(b)
• 457(b) governmental plans
• Profit-sharing plans
• Defined benefit plans

RMDs are NOT required from these accounts during owner's lifetime:

• Roth IRA — No RMDs while owner is alive
• Roth 401(k), Roth 403(b), Roth 457(b) — Starting 2024, these are RMD-exempt (SECURE Act 2.0)

Important SECURE 2.0 Change: Before 2024, Roth 401(k)s required RMDs. Starting in 2024, designated Roth accounts in employer plans are now exempt from lifetime RMDs, aligning them with Roth IRAs.

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Calculating Your RMD

RMD Formula:

RMD = Account Balance (as of December 31 of prior year) ÷ Life Expectancy Factor

Which Life Expectancy Table to Use?

Uniform Lifetime Table (Excerpt)

RMD Calculation Example

Facts: John, age 75, has a Traditional IRA worth $500,000 as of December 31, 2023. He is calculating his 2024 RMD.

Calculation:

$500,000 ÷ 24.6 (factor for age 75) = $20,325.20 RMD

John must withdraw at least $20,325.20 by December 31, 2024.

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Aggregation Rules for RMDs

IRAs (Can Aggregate)

• Calculate RMD for EACH Traditional IRA separately
• Can withdraw total RMD amount from ONE or MORE IRAs
• Same rule applies to inherited IRAs (from same decedent)

Employer Plans (Cannot Aggregate)

• Each 401(k), 403(b), etc. must satisfy its OWN RMD
• Cannot take RMD from one plan to satisfy another

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Still-Working Exception (Employer Plans Only)

If you are still employed by the employer sponsoring the plan, you may delay RMDs from that specific plan until retirement.

Requirements:

1. Must be currently employed (not just part-time eligible—must be actively working)
2. Cannot own more than 5% of the company
3. The plan document must permit the delayed RMD option
4. Applies only to the current employer's plan—not old 401(k)s or IRAs

Does NOT apply to IRAs: You cannot delay RMDs from Traditional IRAs, SEP-IRAs, or SIMPLE IRAs by continuing to work.

Planning Strategy

If your current employer's 401(k) accepts rollovers, you can roll old 401(k) accounts INTO the current plan to take advantage of the still-working exception for those funds as well.

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Penalty for Missed RMDs

Under SECURE Act 2.0, the penalty for failing to take an RMD was reduced:

Correction Window

• 2-Year Period: From December 31 of the year the RMD was missed until the end of the second year following
• Example: Miss 2024 RMD → Correction window ends December 31, 2026

How to Correct

1. Take the missed distribution as soon as possible
2. File Form 5329 with your tax return
3. Request penalty waiver (IRS may grant for reasonable cause)

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Qualified Charitable Distributions (QCDs)

A Qualified Charitable Distribution (QCD) allows taxpayers to donate directly from their IRA to a qualified charity:

QCD Benefits

• Reduces AGI (unlike itemized charitable deductions)
• May reduce Medicare IRMAA surcharges
• May reduce Social Security taxation
• Available even if taxpayer takes standard deduction

EA Exam Tip: QCDs must be made directly to a qualifying 501(c)(3) charity. Transfers to donor-advised funds or private foundations do NOT qualify.

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Inherited IRAs and the 10-Year Rule

The SECURE Act (2019) eliminated the "stretch IRA" for most beneficiaries who inherit after 2019. The 10-year rule now applies to most non-spouse beneficiaries.

Beneficiary Categories

10-Year Rule Details (Final IRS Regulations - 2024)

If original owner died BEFORE their RBD:

• Beneficiary must withdraw ALL funds by end of 10th year after death
• No annual RMDs required during the 10-year period
• Can take distributions in any pattern

If original owner died ON or AFTER their RBD:

• Beneficiary must take annual RMDs during the 10-year period
• Must withdraw ALL funds by end of 10th year
• IRS provided relief: No penalty for missed RMDs in 2021-2024 (transition period)

Important 2025 Start Date

Beginning in 2025, beneficiaries subject to the 10-year rule who inherited from someone who died after their RBD must take annual RMDs. The IRS waived penalties for 2021-2024, but this relief ends.

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RMD Summary Table

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EA Exam Tips

Memorize the birth year cutoffs: 1951-1959 = age 73; 1960+ = age 75

RBD is April 1 of the FOLLOWING year—not December 31 of the year you turn the RMD age

Double RMD year: If you delay first RMD to April 1, you'll have two taxable RMDs in one year

Uniform Lifetime Table key factors: Age 73 = 26.5; Age 75 = 24.6

Still-working exception: Applies to employer plans ONLY, not IRAs, and requires less than 5% ownership

Roth 401(k) change: No lifetime RMDs starting 2024 (SECURE 2.0)

Missed RMD penalty: 25% (reduced from 50%), or 10% if corrected within 2 years

QCDs: Age 70½, up to $105,000 in 2024, counts toward RMD, reduces AGI

Inherited IRA 10-year rule: Most non-spouse beneficiaries must empty account by end of year 10