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.
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| Penalty for Missing | 25% of amount not withdrawn |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
SecuritiesA 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)
SecuritiesA 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.