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Required withdrawals from retirement accounts are back for 2021

Written on Jun 10, 2021

Required minimum distributions (RMDs) will be enforced for 2021 after being waived for 2020. In addition, the RMD age changed to 72 from 70½ (as of 2020) and there are new IRS life expectancy tables used to calculate those yearly withdrawals, which will be in effect for 2022.

RMDs apply to 401(k) plans — both traditional and the Roth version — and similar workplace plans, as well as most individual retirement accounts (Roth IRAs have no required withdrawals until after the account owner’s death).

If you had hit age 70½ before 2020, RMDs kicked in at that point. If you reached (or will reach) that age in 2020 or later, you get more time: Those withdrawals are required to start at age 72.

You can delay your first RMD until as late as April 1 of the year following the one in which you reach the RMD age. In all subsequent years you must take the required amount by Dec. 31. If you don’t make those RMDs, you could face a 50% penalty.

However, if you’re working and contributing to a retirement plan sponsored by your employer (and don’t own more than 5% of the company), RMDs do not apply to that particular account until you retire.

For inherited IRAs, 401(k) plans or other qualified retirement accounts, the balance must be entirely withdrawn within 10 years if the owner died after 2019, unless the beneficiary is the spouse or other qualifying individual. The 2019 Secure Act eliminated the ability of many beneficiaries to stretch out distributions across their own lifetime if the original account owner died on Jan. 1, 2020, or later.