[Required Minimum Distribution]s, of course, are the amount of money people 73 and older must withdraw from their tax-deferred retirement accounts by year’s end. (Note: The RMD age increased this year.) These distributions are calculated by dividing a retirement account’s returns at the end of the previous year by the account holder’s current life expectancy.
“The life expectancy factor decreases every year, so that—combined with a larger year-end balance—means higher RMDs,” explained Kevin Brady of Wealthspire in New York City. He added that the S&P 500 was up roughly 24% in 2023 while U.S. bond markets rebounded more than 5%.
To be sure, some clients won’t face a distribution increase. “For those who were heavily weighted in tech or in index funds, the gains may be much larger than those who were heavily weighted in value stocks,” noted Jennifer Kim of Signature Estate & Investment Advisors in Los Angeles.
But after 2023’s robust returns, “you would be hard-pressed to find someone with a smaller distribution in 2024,” said Dustin Wolk at Crescent Grove Advisors in Milwaukee.
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