Understanding Required Minimum Distributions (RMDs): What Delaware and Pennsylvania Families Need to Know

Retirement accounts are often among the most valuable assets people own. Whether you've spent decades contributing to a traditional IRA or participating in an employer-sponsored retirement plan, it's important to understand the rules governing Required Minimum Distributions (RMDs).

Many people assume they can leave their retirement savings untouched for as long as they like. However, federal law generally requires account owners to begin taking withdrawals from certain retirement accounts once they reach a specified age.

If you're planning for retirement—or reviewing your estate plan—understanding RMDs can help you avoid unnecessary penalties and ensure your estate planning strategy aligns with your long-term financial goals.

What Is a Required Minimum Distribution?

A Required Minimum Distribution (RMD) is the minimum amount that federal law requires you to withdraw each year from certain tax-deferred retirement accounts after reaching a specified age.

Because contributions to these accounts were often tax-deferred, Congress requires distributions so those funds are eventually subject to income tax.

RMDs generally apply to:

• Traditional IRAs

• SEP IRAs

• SIMPLE IRAs

• 401(k) plans

• 403(b) plans

• Most governmental 457(b) plans

• Other qualified retirement plans

Roth IRAs owned by the original account holder are generally not subject to lifetime RMDs.

When Do RMDs Begin?

Under current federal law, most individuals must begin taking RMDs after reaching age 73.

If you reach age 73 in 2026 or later, your first RMD is generally due by April 1 of the year following the year you turn 73. After that, annual RMDs must generally be taken by December 31 each year.

Delaying your first RMD until the following April may result in two taxable distributions in the same calendar year—your delayed first RMD and your second annual RMD—which could affect your overall tax situation.

How Are RMDs Calculated?

The amount you must withdraw depends on several factors, including:

• The value of your retirement account as of December 31 of the previous year.

• Your age.

• The applicable life expectancy table published by the Internal Revenue Service (IRS).

Because these calculations can become complex—particularly if you own multiple retirement accounts or have inherited retirement assets—it is often wise to consult with your financial advisor or tax professional.

What Happens If You Don't Take Your RMD?

Failing to take an RMD can result in significant tax consequences.

Under current law, the IRS may impose an excise tax on the amount that should have been withdrawn but was not. The penalty may be reduced if the error is corrected within the time allowed and certain requirements are met, but it is far better to avoid the issue altogether by planning ahead.

What About Inherited Retirement Accounts?

The rules become considerably more complicated when someone inherits a retirement account.

The SECURE Act and SECURE 2.0 Act changed many of the rules governing inherited retirement accounts.

Depending on your relationship to the original account owner, different distribution rules may apply.

For example:

• A surviving spouse often has several planning options that are not available to other beneficiaries.

• Minor children of the account owner may qualify for special treatment until they reach the age of majority.

• Certain disabled or chronically ill beneficiaries may qualify for different distribution rules.

• Most non-spouse adult beneficiaries are generally required to fully distribute inherited retirement accounts within ten years, although annual RMDs may also be required during that period in certain circumstances depending on whether the original account owner had already begun taking RMDs before death.

Because these rules are highly technical, beneficiary designations should be reviewed regularly as part of your overall estate plan.

Why RMDs Matter in Estate Planning

Retirement accounts pass differently than many other assets.

Unlike property distributed under a will, retirement accounts generally pass according to the beneficiary designation on file with the financial institution.

This means that:

• Your beneficiary designation should be reviewed regularly.

• Your retirement accounts should be coordinated with your estate plan.

• Naming a trust as beneficiary may be appropriate in certain situations, but it requires careful drafting to avoid unintended tax consequences.

For families in Delaware and Pennsylvania, retirement accounts often represent a significant portion of their wealth. Coordinating these accounts with your wills, trusts, and powers of attorney can help ensure your assets are distributed according to your wishes while minimizing unnecessary complications for your loved ones.

Estate Planning Is More Than Preparing a Will

An effective estate plan considers all of your assets—not just your home or bank accounts.

Your attorney should review:

• Your retirement account beneficiary designations.

• Whether your trust should be named as a beneficiary.

• Whether your estate plan reflects changes in federal retirement laws.

• Whether your chosen beneficiaries are still appropriate.

• How retirement assets fit into your broader legacy planning goals.

Regular reviews become especially important after marriage, divorce, the birth of a child or grandchild, retirement, or significant changes in tax law.

A Final Word

Required Minimum Distribution rules are established by federal tax law, meaning they generally apply the same way whether you live in Delaware, Pennsylvania, or elsewhere. However, your overall estate plan—including your wills, trusts, beneficiary designations, and powers of attorney—should be tailored to your individual circumstances and coordinated with the laws of the state where you live.

At Maven Law, LLC, we help individuals and families throughout Delaware and Pennsylvania create comprehensive estate plans that work together with their retirement assets, beneficiary designations, and long-term goals. Reviewing your estate plan regularly can help ensure it continues to reflect changes in your life and changes in the law.

This Article Is Not Financial or Tax Advice

This article is provided for general educational purposes only and should not be construed as legal, financial, tax, or investment advice. Every individual's circumstances are different. Before making decisions regarding Required Minimum Distributions, retirement account withdrawals, beneficiary designations, or tax planning strategies, you should consult with your attorney, financial advisor, and tax professional.