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Retirement Planning > Spending in Retirement > Required Minimum Distributions

Ed Slott: Expect Higher RMDs in 2024. Here's Why.

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As the new year kicks in, one of the first things advisors need to tell their clients is to expect larger required minimum distributions in 2024, according to Ed Slott of Ed Slott & Co.

Why? Because stock values for the Dow Jones Industrial Average at the end of 2023 — the index’s highest year-end close in history, at 37,689.40 — pushed IRAs to their highest balances ever, Slott told ThinkAdvisor Thursday in an interview.

How to Calculate 2024 RMDs

The 2024 RMD calculation begins with the account balance on Dec. 31, 2023, Slott explained.

“That number is locked in, even if markets decline during the year,” Slott said. “Due to the record stock values at year-end, this will produce a larger 2024 IRA RMD (for those who have significant IRA funds in stocks — which are most people).”

As Slott explained, once an IRA owner knows their previous year-end IRA account value, they can look up their age on the IRS Uniform Lifetime Table in IRS Publication 590-B. “Then go to the life expectancy factor (in years) that corresponds to your age, and then divide the year-end IRA balance by that factor,” Slott said. “Then prepare for the increased tax bill next year!”

What Advisors Should Do

Advisors need to advise “clients to expect larger RMDs this year — even if the market tanks,” Slott relayed. “Most people don’t take their RMDs or even think about it, until year-end. Let’s say for some reason the market really tanks and they [the client] says: ‘can I lower my RMD now?’ No, it’s still locked in at last year’s year-end value.”

“I don’t think people are prepared” for the larger RMDs, Slott said.

Clients “won’t really see it [the larger RMD] until next year when they’re doing this year’s taxes,” Slott continued. “But the RMDs are going to be bigger because they’re based on a larger number, and the people who will be affected the most are those with the larger IRAs, but also the oldest people, because as you get older, your RMDs — since they’re based on life expectancy — increase.”


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