A man with a surprised expression looks at a red circle containing hundred-dollar bills, with a background of city skyscrapers. — The SSA Doesn't Forgive If You Forget to Do This About the RMD | Billion Photos, Getty Images Signature, en.e-noticies.cat

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Warning to Millions of Retirees in the US: Social Security Could Fine You for This

Social Security Sends a Clear Message to These Citizens of America Who Are Obligated to Complete a Certain Procedure

31/03/2025 10:06:00h

Miguel Cuartas Ortego

If you are retired in the United States and have certain retirement accounts, Social Security clearly warns you. The truth is that it is crucial to pay attention to Required Minimum Distributions (RMD).

The SSA points out that these distributions are mandatory withdrawals you must make annually starting at a certain age. Failing to meet this requirement can result in severe penalties from the Internal Revenue Service (IRS).

US Social Security, Firm: Pay Attention to Required Minimum Distribution (RMD)

An RMD is the minimum amount to withdraw each year from your tax-deferred accounts, such as traditional IRAs and 401(k) plans. The purpose is to ensure that the accumulated funds are taxed, as these accounts have grown tax-free until the time of withdrawal.

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The US Government Won't Warn Any Longer | Grok

According to the SECURE 2.0 Act, if you turn 73 in 2024, you must start taking your RMDs. Your first RMD must be made no later than April 1, 2025.

Subsequent distributions must be made by December 31 of each following year. This means that if you take your first RMD in April 2025, you will need to make another before the end of that same year.

How Is the RMD Amount Calculated?

The amount of your RMD is determined by dividing your account balance as of December 31 of the previous year by a life expectancy factor provided by the IRS. For example, if your account balance was $100,000 and the factor is 27.4, your RMD would be approximately $3,650. It is advisable to consult the updated IRS tables or a financial advisor to obtain the exact calculation.

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These Retirees Have Until April 1 to Complete This Procedure | Canva Pro, en.e-noticies.cat

Not withdrawing the RMD within the established timeframe can result in a 25% penalty on the amount not withdrawn. However, if you correct the error within the next two years by filing Form 5329, the penalty can be reduced to 10%. It is essential to act promptly to avoid these penalties.

Exceptions and Special Considerations by the SSA

If you are still working and participating in an employer-sponsored retirement plan, you could delay your RMDs until after retirement, the SSA points out. However, this is only if you do not own 5% or more of the company.

Additionally, Roth IRA accounts are not subject to RMDs during the original owner's lifetime. However, beneficiaries must comply with distribution rules after the account holder's death.

Time is of the essence. Make sure to correctly calculate the amount to withdraw and plan your distributions to avoid penalties and optimize your tax situation. Consulting with a financial advisor can be a wise decision to navigate these obligations and ensure a peaceful retirement.

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