RMD (Required Minimum Distribution)
RMDs are mandatory annual withdrawals from traditional retirement accounts (Traditional IRA, 401(k)) that must begin at age 73, calculated based on account balance and life expectancy.
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Exam Tip
RMDs start at 73. Roth IRAs have NO RMDs for original owner. 25% penalty for missing RMD.
What is an RMD?
Required Minimum Distributions (RMDs) are minimum amounts that retirement account owners must withdraw annually from their tax-deferred retirement accounts starting at age 73.
RMD Rules
| Factor | Requirement |
|---|---|
| Starting Age | 73 (as of SECURE 2.0) |
| First RMD Deadline | April 1 of year after turning 73 |
| Subsequent Deadlines | December 31 each year |
| Penalty for Missing | 25% of amount not withdrawn |
Accounts Subject to RMDs
| Account Type | RMD Required? |
|---|---|
| Traditional IRA | Yes |
| 401(k), 403(b), 457 | Yes |
| SEP IRA | Yes |
| SIMPLE IRA | Yes |
| Roth IRA (owner) | No |
| Roth 401(k) | No (after SECURE 2.0) |
| Inherited accounts | Yes (different rules) |
RMD Calculation
RMD = Account Balance ÷ Life Expectancy Factor
- Use December 31 balance from prior year
- Life expectancy factor from IRS Uniform Lifetime Table
- Recalculate each year
Example
| Age | Account Balance | Life Expectancy Factor | RMD |
|---|---|---|---|
| 73 | $500,000 | 26.5 | $18,868 |
| 75 | $480,000 | 24.6 | $19,512 |
| 80 | $400,000 | 20.2 | $19,802 |
Strategies
- Delay first RMD - Wait until April 1, but two RMDs in one year
- QCD (Qualified Charitable Distribution) - Donate RMD directly to charity (tax-free)
- Roth conversions - Convert before 73 to reduce future RMDs
Study This Term In
Related Terms
Roth IRA
A Roth IRA is a retirement account funded with after-tax dollars that grows tax-free and allows tax-free withdrawals in retirement, with no required minimum distributions.
401(k)
A 401(k) is an employer-sponsored retirement savings plan that allows employees to contribute pre-tax dollars, with potential employer matching, and tax-deferred growth until withdrawal.
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