Required Minimum Distributions
Plain English
The government lets tax-deferred accounts grow without current tax, but eventually requires you to start withdrawing (and paying tax on) a minimum amount each year, starting at an age set by law.
What is it?
A Required Minimum Distribution (RMD) is the minimum amount that must be withdrawn each year from most tax-deferred retirement accounts, starting at an age set by law. The amount is calculated as the account balance divided by a distribution period factor from an IRS life-expectancy table.
Why does it matter?
RMDs affect retirement income planning and taxes — an RMD is taxable income in the year it's taken, regardless of whether you need the cash, and missing one can result in a penalty.
How does it work?
See the Required Minimum Distribution calculator: RMD = account balance (as of the prior year-end) ÷ your distribution period factor. The factor depends on your age and is published by the IRS; it changes as you age and can change if the underlying table itself is updated.
Risks and limitations
The starting age for RMDs and the underlying IRS life-expectancy tables have changed via legislation in the past and could change again — always verify the current rules for your specific age and account type rather than relying on a remembered figure.
Questions to ask a professional
At what age do my RMDs start? What is my current distribution period factor? How do RMDs interact with my other income sources and tax bracket for the year?