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Retirement Planning

What you need to know about retirement accounts and required minimum distributions

Required minimum distributions (RMDs) are the amount you need to withdraw from your retirement accounts each year after a certain age.

What You Need to Know About Retirement Accounts and Required Minimum Distributions

When it comes to retirement planning, most of us find ourselves overwhelmed by information overload regarding various types of retirement savings accounts, and IRS rules and regulations. One such retirement account rule is required minimum distributions or RMDs. 

What does RMD mean?

RMDs are mandatory, minimum yearly withdrawals that must be taken out of retirement accounts in which you contributed tax-deferred dollars or have had tax-deferred earnings. The IRS requires you to begin taking out  required minimum distributions from your accounts in the year you turn age 72. While you can withdraw more than the RMD, you must take out the minimum amount or be subject to severe penalties.

Retirement accounts that typically require a RMD at age 72 include:

  • Most 401(k)s
  • Most 403(b) plans
  • Traditional IRAs
  • Rollover IRAs
  • SEP IRAs
  • Most Keogh accounts

Calculating your RMD

The exact amount of your RMD can change from year to year, and is calculated by dividing your retirement account's year-end value by the life expectancy factor set by the IRS. You can calculate your RMD by using one of the IRS's worksheets, or an online calculator.



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