Biden tax plan series
WHAT is required minimum distribution (RMD)?
A required minimum distribution (RMD) is the amount of money that you must withdraw from your traditional IRA, employer-sponsored retirement plan, SEP, or SIMPLE individual retirement account (IRA) when you reach retirement age.
You must begin withdrawing from a retirement account by April 1 following the year you reach age 72. The RMD age had been 70½ years old prior to 2020. You must then withdraw the RMD amount each subsequent year based on the current RMD calculation. In summary:
- The required minimum distribution is the amount you must take out of your account to avoid penalties for failure to withdraw on time.
- If you have multiple accounts, you will usually need to calculate the RMD for each separately and may have to take an RMD from each.
Current tax law
- Required minimum distributions (RMDs) must begin by April 1 after you reach age 72.
Proposed changes
The required starting age of 72 would be delayed as follows:
- If you turn 72 in 2022, RMD must begin when you reach 73.
- If you turn 73 in 2022, RMD must begin when you reach 74.
- If you turn 74 in 2022, RMD must begin when you reach 75.
Later starting ages for allow money to continue to grow on tax-advantaged basis.
Another proposal would allow individuals aged 62 and older to contribute.
This would allow more income to be deferred from current taxation.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.
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He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to [email protected].
