What are Required Minimum Distributions (RMDs)?
Required Minimum Distributions (RMDs) are the minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 72 (or 70½ if you reach 70½ before January 1, 2020), and for every subsequent year.
Why are RMDs Important for Nurses?
Nurses, like other professionals, often have
retirement accounts such as 401(k)s or IRAs. Understanding RMDs is crucial because failure to withdraw the required amount can result in significant tax penalties. This can impact a nurse’s financial planning and overall retirement strategy.
When Do Nurses Need to Start Taking RMDs?
The first RMD must be taken by April 1 of the year following the calendar year in which the retirement account holder reaches age 72 (or 70½ if they reached 70½ before January 1, 2020). Subsequent RMDs must be taken by December 31 of each year.
How Are RMDs Calculated?
RMDs are calculated by dividing the retirement account’s prior year-end fair market value by a distribution period from the IRS's "Uniform Lifetime Table". For those who are married and whose spouse is more than 10 years younger, the "Joint Life and Last Survivor Expectancy Table" is used.
Can RMDs Be Reinvested?
Yes, once the RMD is withdrawn, it can be reinvested in a taxable account. However, it is no longer sheltered from taxes as it was in the retirement account. Proper planning is required to manage these funds effectively.
How Can Nurses Plan for RMDs?
Nurses should work with a
financial advisor to create a strategy for withdrawing RMDs. This includes understanding the tax implications, planning for the timing of withdrawals, and considering the best way to reinvest or use the withdrawn funds.
Are RMDs Required for Roth IRAs?
No, Roth IRAs do not have RMDs during the account holder’s lifetime. This can make Roth IRAs an attractive option for nurses looking to minimize future required withdrawals and associated taxes.
Conclusion
Understanding and managing RMDs is crucial for nurses to ensure a financially stable retirement. By knowing when and how much to withdraw, as well as the implications of failing to do so, nurses can avoid penalties and make the most of their retirement funds.
