by Kyle S. Plotkin
Investment Advisor Representative
[email protected]
It’s January, meaning tax season is just around the corner. This year, the IRS has announced that taxpayers can begin filing their 2024 tax returns beginning this Monday, January 27th. As usual, the deadline to file your taxes (or request an extension) will be April 15th, which this year falls on a Tuesday. Coincidentally, April 15th of this year is also the fourth night of Passover, and the Phillies will be playing their 17th game of the season, at home against the Giants. We’ll also be coming up on Easter, which will be that following Sunday, April 20th. It might be frigid outside right now, but warmer weather isn’t too far off!
Another consequence of the new year in regards to taxes is Required Minimum Distributions (or RMDs). For those unfamiliar, this is the deal that you make with your favorite Uncle Sam when you stash money away in those IRAs, 401(k)s, and 403(b)s. Once you hit a certain age, the IRS requires you to begin taking a minimum distribution each year and finally pay those income taxes that you avoided way back when you made those initial contributions. That magic age has been raised a few times in recent years so the first distribution must be taken in the year you turn 73. You can take the RMD anytime during that year.
This means that anyone born in 1952 must take their first Required Minimum Distribution in 2025. Technically, you’re able to delay your first year of RMDs until April 1st of the following year, but you then must take two distributions in that year. It makes sense to do that in certain situations (for example, you retire during this year and don’t want to jump tax brackets), but most of you will take your RMD sometime between now and the end of December.
The IRS distributes what they call a Uniform Lifetime Table (based on life expectancy) to help calculate how much you must take each year. To simplify, it begins at 3.77% of your IRA (or 401(k), etc.) balances and goes up a little bit each year from there. By the time you reach age 90, your RMD is 8% of your IRA balance at that time. If you live to 120, you’ll have to take 50%! That’s something to look forward to!
For our clients, RMDs are something that we review every time we have a Forward Focus Meeting. We do our best to ensure that every client has taken that minimum amount of distribution by the time December rolls around, to avoid the potential 25% penalty if you’ve missed your RMD. Our Client Services team works diligently to make sure that these get completed for every one of our clients before the end of the year.
Feel free to reach out to one of our team members if you have questions. And remember, April 15th (and warmer weather) isn’t too far away from now!