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April 1 is the last day for Americans to begin receiving their 2021 required minimum distributions without penalty – if you’re mandated to take a withdrawal, don’t wait.
Retirees who turned 72 in the last half of 2021 have until April 1 to take their required minimum distributions (or RMDs) from their workplace retirement accounts, such as 401(k), 403(b) and 457(b) plans, and traditional IRAs, the Internal Revenue Service said. The deadline for RMDs is usually Dec. 31, though people who turned 72 have until April 1 of the following year to begin their withdrawals.
This is not to be confused with the annual requirement to take distributions – people who take their first RMD by April 1 will still be required to take an RMD by Dec. 31 of this year as well, as the April 1 deadline is only an extension for people just beginning to take withdrawals after their 72nd birthday. (In other words, the Dec. 31 deadline would qualify for the 2022 distribution, and the distribution made by April would fulfill the requirement for 2021.)
RMD rules do not apply to Roth IRAs.
See: IRA ‘required distribution’ rules are bad policy
Individuals face a 50% penalty for not taking the full amount of a required minimum distribution, which is based on the amount that was required to be withdrawn. For example, if someone’s RMD was $2,000, and he did not take the distribution properly, he’d face a $1,000 penalty. If someone’s RMD was $2,000, and he took only $1,000 out of his account, his penalty fee would be $500 (50% of the remaining $1,000).
These rules also only apply to workplace plans if the individual is no longer employed by that establishment. For example, if a worker turned 72 at the end of last year and has three 401(k) plans at a previous employer plus a 401(k) plan at a current employer, she must only initiate RMDs for the three old accounts – not the current one. In that instance, she’d generally be able to wait until April 1 of the year following her retirement to begin the RMD for that account, though she should check with her employer.
Workers should consult their HR departments or plan administrators to confirm the rules specific to their plans, the IRS said.
There is a distinct formula used to calculate what an individual’s RMD is, and it includes the total account balance at the end of the prior year, the person’s age and a life expectancy chart the IRS uses. More information on RMDs can be found on the IRS’s website here.
