RMDs are back after being halted last year. Individuals 72 and older MUST take annual RMDs from traditional IRAs or pay a 50% penalty. For 2021, you start with your IRA balances as of December 31,2020, and use the IRA Pub. 590-B to come up with the amount required to be withdrawn. The amounts can be taken from any IRA you pick. The same rules apply to 401(k)s and other workplace defined-contribution plans, with two important exceptions. First, people who work past 72 can delay RMDs from their current employers 401(k) until they retire, provided they do not own more than 5% of the firm that employs them. Second, for people with multiple 401(k)s, the RMD must be taken from each account.

If 2021 is your first RMD year, you have until April 1,2022, to take the RMD. The distribution will still be based on your total IRA balance as of December 31,2020. If you opt out to defer your first RMD to 2022, you will be taxed in 2022 on 2 payouts: The one for 2021 the you deferred and the RMD for 2022. This doubling up would hike your 2022 income and could push you into a higher income tax bracket.