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Tax Center

What to know about required minimum distributions (RMDs)

The Internal Revenue Code (IRC) requires that IRA owners and participants in qualified employer sponsored retirement plans (QRPs) such as 401(k)s, 403(b)s, and governmental 457(b)s must begin taking distributions annually from these accounts. These distributions are referred to as RMDs. Once you reach your required beginning date (RBD), you will begin taking RMDs from any Traditional, SEP, and SIMPLE IRAs that you have, as well as from any QRPs left at former employers. The RMD rules can be complex and excise taxes for not complying can be significant. The following helps explain the rules regarding RMDs.

Please Note: This material has been prepared for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any planning, trading or distribution strategy. The accuracy and completeness of this information is not guaranteed and is subject to change. It is based on current tax information and legislation as of December 2023. Since each investor’s situation is unique, you need to review your specific investment objectives, risk tolerance, and liquidity needs with your financial professional(s) before an appropriate planning, investment or distribution strategy can be selected. Also, since Wells Fargo Advisors does not provide tax or legal advice, investors need to consult with their own tax and legal advisors before taking any action that may have tax or legal consequences.

Please keep in mind that rolling over your qualified employer sponsored retirement plan (QRP) assets to an IRA is just one option. You generally have four options for your QRP distribution:

- Roll over your assets into an IRA
- Leave assets in your former QRP, if plan allows
- Move assets to your new/existing QRP, if plan allows
- Take a lump-sum distribution and pay the associated taxes

Each of these options has advantages and disadvantages and the one that is best depends on your individual circumstances. When considering rolling over assets from a QRP to an IRA, factors that should be considered and compared between the QRP and the IRA include fees and expenses, services offered, investment options, when penalty-free distributions are available, treatment of employer stock, when required minimum distributions begin and protection of assets from creditors and bankruptcy. Investing and maintaining assets in an IRA will generally involve higher costs than those associated with QRPs. You should consult with the plan administrator and a professional tax advisor before making any decisions regarding your retirement assets. Your Wells Fargo Advisors Financial Advisor can help educate you regarding your choices so you can decide which one makes the most sense for your specific situation. Before you make a decision, speak with your current retirement plan administrator, and tax professional before taking any action.