December 31 is the end of the year. Get your IRA RMDs before it is too late.
The end of calendar year 2023 is quickly approaching. For U.S. persons over a certain age: The RMD for one’s IRA (and 401k) balance as of December 31, 2022 must be withdrawn by December 31, 2023.
This is not new news. However if you miss the deadline, there are onerous penalties. If you are unsure of your status, check with your custodian (the bank or broker where your IRA and/or 401k funds are held).
Don’t Hesitate
It’s sometimes only natural to procrastinate over most things. But in this situation, procrastination could incur a substantial cost.
Money withdrawn from IRAs during calendar year 2023 is included in income for 2023, so must be accounted for in one’s tax return for 2023, usually due by April 15, 2024. As a result, when I withdraw money from my IRA balance, I make sure to do two things.
Firstly, I withdrawn a little more than the exact minimum required. So if I made a small miscalculation, it won’t bite me later.
Secondly, not only do I be sure to withhold some federal and state taxes, I withhold more than the minimum required taxes. There are reasons for this.
Regarding Taxes
When I was employed, taxes were withheld normally from my paycheck. When I became self-employed, I needed to be sure to have enough additional funds for each quarterly estimated tax date.
When I retired, this quarterly estimated tax event is as significant as ever, if not more so. I do not withhold taxes from my Social Security income, nor from regular interest or dividends. Therefore, withholding taxes from 401k withdrawal becomes a convenient way to ease the tax payment burden for that tax year.
Since the money I am withdrawing from IRAs is money I don’t have until it is transferred into my checking account, I find withholding more than the minimum taxes a convenient way to ease handling of my tax responsibilities.
Have you managed your RMDs properly? Let me know here.
The illusttration of a camellia is from “Illustrations and descriptions of the plants which compose the natural order Camellieae and of the varieties of Camellia japonica cultivated in the gardens of Great Britain” by A. Chandler, published in 1831. Courtesy Biodiversity Heritage Library of the Smithsonian Instutution.
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