By Ian Berger, JD
IRA Analyst

 

Question:

Our client is 75 years old. He just retired on January 1, 2025. The company has recognized his retirement date as being January 1, 2025.

When must he take his first required minimum distribution (RMD)?

Rick

Answer:

Hi Rick,

If the client actually worked on January 1, 2025, then his first RMD year is 2025. The RMD for the first RMD year can be delayed until April 1 of the next year. So, he could delay the 2025 into 2026 – no later than April 1, 2026. But if he did that, he would have two RMDs payable in 2026, one for 2025 and the other for 2026.

It gets tricky if your client did not work on January 1, 2025 (and his last actual work day was in 2024). There is no IRS guidance on this situation. But the IRS could say that he actually retired (i.e., worked his last day) in 2024 even though the company is showing January 1, 2025, as his retirement date. If so, his first RMD was for 2024 and that RMD was due by April 1, 2025. If he has not taken the 2024 RMD, he would have to take it ASAP and file for a penalty waiver using Form 5329.

Question:

If I made a prior year Roth IRA contribution for 2024 in spring of 2025, when does the 5-year rule for holding that IRA begin?

Many thanks.

Phil

Answer:

Hi Phil,

The 5-year holding period for determining whether the distribution of earnings is taxable begins as of the first day of the year for which a contribution (or conversion) was made to any Roth IRA. The contribution you made in the spring of 2025 was for 2024. So, the 5-year period began on January 1, 2024.

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https://irahelp.com/slottreport/first-rmd-year-and-roth-ira-5-year-period-todays-slott-report-mailbag/