What Is a Required Minimum Distribution on Retirement Plans?


No matter how far or near you are to retirement, you probably know it’s important to save for your future.

Something we don’t talk about as much is taking your money out when retirement finally arrives.

You may already know you need to wait until a certain age (59.5) before you can withdraw money from retirement accounts penalty-free.

But there are also penalties if you don’t withdraw enough money once you turn 72.

What Is a Required Minimum Distribution?

A required minimum distribution (RMD) is the amount of money you are required to withdraw from your retirement account each year after you turn 72.

You get the cash and Uncle Sam gets income tax on the withdrawal.

Your retirement plans are shielded from taxes during your working years, but the government doesn’t want to miss out on its cut forever.

That’s why most retirement accounts — except Roth IRAs — have required minimum distributions.

According to the Internal Revenue Service, you need to withdraw an RMD starting at age 72 if you have one of the following retirement savings accounts:

You must start taking RMDs no later than April 1 following the year you turn 72.

If you don’t withdraw the money, you’ll owe big bucks: Failing to take a distribution — or not withdrawing enough — can result in a 50% tax on the amount you didn’t take.

How much you’re required to withdraw changes from year to year and is based on IRS life expectancy tables.

8 Facts You Need to Know About Required Minimum Distributions

Required minimum distributions aren’t inherently bad. Most of us want — or frankly, need — to use the retirement money we saved up for years.

You might even consider yourself lucky. Many people work their entire lives and still run out of money in their retirement accounts before they turn 72.

Unfortunately, there’s no avoiding taxes when RMDs kick in.

Here are eight important things you should know about RMDs that will help you prioritize how you save now and…



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