Yes, the Solo 401k works just like any other retirement plan and so Required Minimum Distributions (RMDs) are mandatory. As a general rule, RMDs are first taken on April 1st of the first calendar year after the plan participant (you) turns 73 years old.
The first RMD is granted a little leeway, allowing until April 1st of the year following the 73rd birthday to be taken. After the initial year, all subsequent RMDs must be taken by December 31st each year until the account is fully depleted.
At what age must I begin distributions?
If you are already over the age of 73 in 2023, your next RMD must be taken by December 31, 2023.
If you are turning 73 years in 2023, the deadline for your first RMD is April 1, 2024.
If you're turning 72 in 2023, you don't have to start taking RMDs from your Solo 401k until 2024 when you turn 73.
This means that your first RMD will be due in 2024. It's important to note that there is no RMD for 2023, so the deadline for taking your first RMD has been extended to April 1, 2025.
When did this all change?
Regulations surrounding Required Minimum Distributions (RMDs) have undergone changes with the implementation of the SECURE Act 1.0 and 2.0.
Here are the key points to note:
SECURE Act 1.0 increased the RMD age from 70 ½ to 72.
SECURE Act 2.0 further increases the RMD age to 73, and as late as age 75.
The change to the RMD age means that the first RMD must be taken on April 1 of the year following the year in which the individual reaches the RMD age.
The SECURE Act 2.0 removed the RMD requirement for Roth 401k plans, allowing them to function more like a Roth IRA (no RMDs).
For those born between 1951 and 1956, the RMD age has been moved from 72 to 73.
Those born in 1957 or 1958 will need to take their first RMD at age 74.
Those born in 1959 or later will be required to take their first RMD at age 75.
It’s really important that you take your RMD payment from your Solo 401k plan. Failure to receive an RMD (or receiving too little of a payment) can result in a 50% excise tax on the amount you were supposed to distribute.
For more information, check out the IRS website resources. Further questions should be directed to your tax advisor and/or CPA.