As of January 1, 2023,the Internal Revenue Service requires you to start withdrawing money from your before-tax and Roth 403(b) account at the later of age 73 or the calendar year you retire from an employer through which you contributed. These withdrawals are called required minimum distributions (RMD). Your minimum distribution is a function of your account balance and your life expectancy.
Are there any ways to eliminate the need for an RMD in my 403(b)?
Under prior law, a Roth IRA account owner did not have to take lifetime RMDs, but no such exception existed for Roth monies under 403(b) and other employer-sponsored retirement plans. SECURE 2.0 ends lifetime RMDs for Roth designated accounts in employer sponsored plans effective for taxable years beginning January 1, 2024. However, for retirees who attain age 73 in 2023, RMDs on Roth 403(b) monies must still be made by April 1, 2024.
What about my IRA?
Traditional and SEP IRA accounts also require RMDs to start at age 73. However, unlike the 403(b), you cannot delay the RMD past age 73, even if you continue to work.
What if I don’t take my RMD?
If you miss taking your RMD, the penalty is 25%, but if corrected during the two-year correction window, it is further reduced to 10%.
How does Member Benefits help?
If you have an account with us, Member Benefits will send you an RMD notice at the appropriate time and can assist you in setting up your RMD schedule. We continue to send RMD notices on an annual basis.