How To Add Required Minimum Distributions To Empower Retirement Plan

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What Are RMDs?

Introduction

Required Minimum Distributions (RMDs) are mandatory withdrawals from retirement accounts such as 401(k)s, 403(b)s, and traditional IRAs. If you have an Empower Retirement Plan, it’s essential to understand how to add RMDs to ensure compliance with IRS regulations while optimizing your retirement savings.

In this guide, we will explain:

What RMDs are and why they are important.
How to calculate your RMD amount.
Steps to add RMDs to your Empower Retirement Plan.
Tax implications and strategies to minimize tax burdens.
Common mistakes and FAQs.

How to Add Required Minimum Distributions (RMDs) to an Empower Retirement Plan

RMDs are required withdrawals that must be taken from certain retirement accounts once you reach a specific age. As of 2024, the required starting age for RMDs is 73 (due to the SECURE 2.0 Act).

Which Accounts Require RMDs?

RMDs apply to:

401(k) plans
403(b) plans
Traditional IRAs
SEP IRAs
SIMPLE IRAs
Other employer-sponsored retirement plans

Roth IRAs do not require RMDs during the account holder’s lifetime.

Why Are RMDs Important?

The IRS requires RMDs to ensure tax-deferred retirement savings are eventually taxed.
Failure to take RMDs can result in a penalty of up to 25% of the required amount.
Proper RMD planning can help minimize taxes and maximize your retirement income.

How to Calculate Your RMD Amount

The IRS provides a uniform lifetime table to determine RMD amounts. The formula is:

Steps to Calculate Your RMD

Find your account balance as of December 31 of the previous year.
Determine your IRS life expectancy factor (based on your age from the IRS table).
Divide your account balance by the factor to get your RMD amount.

👉 Example: If you are 75 years old and have $500,000 in your Empower Retirement account with a life expectancy factor of 22.9, your RMD would be:

Steps to Add RMDs to Your Empower Retirement Plan

Adding RMDs to your Empower Retirement Plan involves a few essential steps to ensure compliance and proper withdrawals.

1. Log Into Your Empower Account

Visit Empower Retirement’s website.
Sign in to your account using your credentials.

2. Navigate to the RMD Section

Go to the ‘Withdrawals’ or ‘Distribution’ section.
Look for an option related to ‘Required Minimum Distributions.’

3. Choose Your RMD Withdrawal Method

Automatic Withdrawals: Set up annual RMDs to be withdrawn automatically.
Manual Withdrawals: Withdraw funds manually each year before the deadline.
Lump-sum vs. periodic withdrawals: Choose between taking the full RMD in one transaction or splitting it into smaller withdrawals throughout the year.

4. Provide Banking Information

If opting for direct deposit, enter your bank account details.
Ensure accuracy to avoid delays or errors.

5. Confirm and Submit Your Request

Review your withdrawal method and amount.
Confirm and submit the request.
You may receive an email confirmation from Empower Retirement.

6. Keep Track of Your RMDs

Set calendar reminders to ensure withdrawals are completed on time.
Check your Empower account regularly to monitor your distributions.

Tax Implications of RMDs

How Are RMDs Taxed?

RMDs from pre-tax accounts (401(k), traditional IRA, 403(b)) are taxed as ordinary income.
State taxes may also apply depending on your location.
RMDs could push you into a higher tax bracket if not managed properly.

Strategies to Reduce RMD Tax Burden

Qualified Charitable Distributions (QCDs): Donate up to $100,000 of your RMD to charity tax-free.
Roth Conversions: Convert portions of your pre-tax retirement account to a Roth IRA before reaching RMD age.
Delaying RMDs: If still working at 73, you may delay RMDs from your employer’s plan (if the plan allows).
Tax bracket management: Withdraw strategically to stay in a lower tax bracket.

Common Mistakes to Avoid

Missing the deadline (December 31 each year) can result in a 25% penalty on the required amount.
Not updating beneficiaries, which can complicate RMD distribution after death.
Forgetting to include all accounts when calculating RMDs.

FAQs

1. What happens if I forget to take my RMD?

If you miss your RMD deadline, the IRS imposes a penalty of 25% of the required withdrawal amount (which may be reduced to 10% if corrected in a timely manner).

2. Can I withdraw more than my RMD amount?

Yes, you can withdraw more, but you will still owe taxes on the excess amount.

3. Can I roll over my RMD into another retirement account?

No, RMDs cannot be rolled over into another tax-advantaged account.

4. Do Roth 401(k)s require RMDs?

Yes, but starting in 2024, Roth 401(k)s will no longer be subject to RMDs under the SECURE 2.0 Act.

5. Can I automate my RMD withdrawals with Empower Retirement?

Yes, Empower allows users to set up automatic RMD withdrawals to ensure compliance.

Conclusion

Understanding and managing your RMDs within your Empower Retirement Plan is crucial for both IRS compliance and financial planning. By following the outlined steps, you can ensure timely withdrawals, optimize your tax strategy, and avoid costly penalties.

To stay on top of your RMDs, consider consulting a financial advisor and leveraging Empower Retirement’s automated RMD services.

How to Add Required Minimum Distributions To Empower Retirement Plan