Understanding Required Minimum Distributions (RMDs)
RMDs from retirement accounts can be confusing. Learn when they're required, how to calculate them, and strategies to manage them.
Required Minimum Distributions are mandatory withdrawals from retirement accounts. Missing them can result in severe penalties.
What Are RMDs?
RMDs are minimum amounts that must be withdrawn annually from:
- Traditional IRAs
- 401(k), 403(b), and 457 plans
- SEP and SIMPLE IRAs
- Inherited retirement accounts
Note: Roth IRAs don't require RMDs during owner's lifetime.
When Do RMDs Start?
- Age 73 for those born 1951-1959
- Age 75 for those born 1960 or later
- First RMD due by April 1 of the year after reaching the required age
- Subsequent RMDs due by December 31
How to Calculate RMDs
- Determine account balance as of December 31 of prior year
- Find life expectancy factor from IRS tables
- Divide balance by life expectancy factor
Penalties for Missing RMDs
- 25% excise tax on amount not withdrawn
- Reduced to 10% if corrected within 2 years
- Take any missed RMDs as soon as possible
RMD Strategies
- Qualified Charitable Distribution: Donate up to $100,000 directly to charity to satisfy RMD
- Multiple accounts: Calculate separately but withdraw from any combination
- Take monthly: Spread withdrawals for income management
- Tax planning: Consider other income when timing RMDs
For Caregivers
- Track RMD deadlines on calendar
- Ensure account custodians have correct contact info
- Review annually with tax advisor
- Keep records of all distributions