How do I calculate the required minimum distribution (RMDs) for a Rocket Dollar Self-Directed IRA account?

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Just like any Traditional IRA or Traditional 401(k), the required minimum distributions are minimum withdrawal amounts that must be taken annually by the plan or IRA owner. Tax rules for Self-Directed IRAs are identical.

What are Required Minimum Distributions?

RMDs ensure that money and income, which have long been tax-deferred inside of Traditional IRAs or 401(k)s, are eventually paid in taxes to the government.

RMDs are minimum withdrawal amounts that must be taken annually by the plan or IRA owner. For many decades, the first of these RMDs was required by April 1 of the year after you turned 70½, known as the required beginning date. The SECURE 2.0 Act increased the age to 73 in 2023 and established an additional increase that will bring the starting age to 75 by 2033. RMDs continue for the retirement account owner’s lifetime and generally affect the account’s beneficiaries.

IRA and Retirement plan participants and 401(k) owners are responsible for taking the correct amount of RMDs on time every year or you may face stiff penalties. Roth IRA and Roth 401(k) owners do not have to take RMDs, as you already paid taxes on those contributed dollars.

Calculating your RMDs is a collaborative effort between you and Rocket Dollar—our support team is available to assist you.

When are RMDs due? Are there any penalties?

  • Your first RMD at 73 by December 31st of that year, then April 1 for years after that.
  • An inherited IRA owner must take a distribution by the year after the owner's death on December 31st.
  • If you are late to take an RMD, you could be subject to penalties from the IRS.

What’s the easiest way to complete my current RMD requirement?

If you an IRA at another provider (Fidelity, Vanguard, Charles Schwab, etc.), the easiest way to complete your RMD is to do it at your other IRA provider for your stock and bonds.

For example, Chuck has four IRAs, three pre-tax Traditional IRAs and one post-tax Roth IRA.

Account Provider Required RMD
Fidelity Traditional IRA $2000 RMD needed
Vanguard Traditional IRA $3000 RMD needed
Charles Schwab Roth IRA $0 RMDs are never needed for Roths
Rocket Dollar Traditional IRA $5000 RMD needed

To satisfy Chuck’s RMD requirements, he tells Fidelity to distribute $10,000. This completes his IRS responsibility for RMDs, and Chuck sends emails to Vanguard and Rocket Dollar confirming his RMD responsibility is finished.

IRS RMD Worksheet: See the PDF below or the linked article here

  • Calculate the value of all your IRAs, with the values of the previous year on December 31st. So, if you are calculating your RMDs on December 10th, 2023, find the Fair Market Value (FMV) you provided for December 31st, 2022.
  • Distribution period from the table (Table III) for your age on your birthday this year.
  • Line 1 is divided by the number entered on line 2. This is your required minimum distribution for this year from this IRA.
  • Repeat steps 1 through 3 for each of your (non-inherited) IRAs.

Table III Life expectancy

Table III Life Expectancy

How do I complete my RMD with my IRA custodian?

The deadline to take the distribution is December 31st of the RMD year or April 1st of the next year if you turn 73 on or before 12/31/2023. Using the 12/31/2022 year-end value of ALL your pre-tax IRAs, please keep in mind your IRA custodian may assist you with calculating RMD but will not offer tax advice.

Once calculated, email our support team the amount (if any) you will be withdrawing from this IRA. You can decide which IRA you take the RMD from—it does not have to be this IRA. If you are not withdrawing anything, email our team to confirm you are taking care of your RMD from another IRA.

Funds MUST be available in your IRA cash account with your custodian—you may need to liquidate a portion of your investment held in your IRA name if cash needed is not available in your account and send those funds from your investment back to IRA account.

Once the needed funds are available in your IRA account, our support team will prefill the IRA custodian's distribution form to send RMD funds to you, the IRA account holder.

You can find additional information on the IRS website here and by reaching out to a qualified tax advisor.

I have an IRA LLC account, can I send myself the funds?

DO NOT send the funds from your IRA LLC directly to yourself. The IRA custodian MUST be the party that sends the RMD to you, the IRA account holder. Sending funds to yourself may not properly be categorized as a distribution and could cause errors on your taxes.

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