What are Required Minimum Distributions (RMDs) and how is the amount of RMDs calculated?

What are Required Minimum Distributions (RMDs) and how is the amount of RMDs calculated?

Required Minimum Distributions (RMDs) are the minimum amounts that a retirement plan account owner must withdraw from their 401(k) or 403(b) each year once they reach age 73.

• The annual deadline to take your RMD is December 31 of each year.
• You may delay your first RMD until April 1 of the year after you turn 73, but you must take RMDs in all subsequent years.

The RMD for each account is generally calculated by dividing the prior December 31 balance of your retirement plan account by a life expectancy factor published by the IRS. These factors are available in IRS Website

• Choose the appropriate life expectancy table based on your situation (e.g., single, married, joint life expectancy).
• Each retirement account (401(k), 403(b), IRA) is calculated separately.

How to initiate an RMD

• Contact your retirement plan’s Recordkeeper to request an RMD.
• You can often find an RMD form in your online account to complete and submit.

Note: Failing to take your RMD or withdrawing less than the required amount may result in a significant tax penalty.

RMD Calculation Example

Total RMD to withdraw: $3,649.64 + $1,824.82 + $2,737.23 = $8,211.69

Notes:

• Each account is calculated separately.
• You can withdraw from one or multiple accounts to satisfy the total RMD requirement.
• Use the correct life expectancy factor from IRS Publication 590-B for your situation.