Talk to an Advisor

Required Minimum Distribution (RMD)

Required Minimum Distribution (RMD) is a term used in 401(k) plans and other types of retirement savings accounts. It refers to the minimum amount that a retiree must withdraw from their account each year starting at a certain age, as required by the Internal Revenue Service (IRS).

The RMD rules apply to all employer-sponsored retirement plans, including 401(k), 403(b), 457 plans, and other defined contribution plans, as well as to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs. Roth IRAs do not require withdrawals until after the death of the owner.

The required beginning date for taking RMDs is generally April 1 following the calendar year in which the individual reaches the age specified by the IRS, which as of my last update was 72, having been raised from 70½ by the SECURE Act passed in late 2019.

The amount of the RMD is calculated by dividing the retirement account’s prior year-end balance by a life expectancy factor that the IRS publishes in tables in Publication 590-B, depending on the beneficiary’s age. Failing to take an RMD, or not withdrawing enough, may result in a significant tax penalty — typically 50% of the amount not withdrawn as required.