Required minimum distributions

What to know about RMDs

An RMD is an IRS-mandated amount of money that you must withdraw from traditional IRAs or an employer-sponsored retirement account each year. It's important to understand when you need to take an RMD, how to avoid potential costly penalties for late distributions, and maximize your withdrawal strategy.

Age requirement:
The IRS requires you to start taking RMDs at 72.

RMD amounts:
If you are the original account owner your RMD is calculated by dividing prior year-end account balances by a life expectancy factor in the IRS Uniform Lifetime Table (PDF). However, if you are married and your spouse is the only primary beneficiary and is more than 10 years younger than you, your RMD is calculated using the IRS Joint Life Expectancy (PDF) table. If your spouse is no more than 10 years younger, your RMD is calculated using the IRS Uniform Lifetime Table (PDF).

Account types:
RMDs must be taken out of tax-deferred retirement accounts, including:

There are no RMDs for Roth IRAs, unless they are inherited.

Deadlines:
April 1 – Deadline for the first RMD in the year after you turn 72. You do not have to take an RMD from your workplace plan until you terminate or retire.

December 31 – Deadline for each following RMD.

Note that if you delay your first RMD until April, you'll have to take 2 RMDs your first year. The first will still have to be taken by April 1; the second, by December 31.

Penalties:
Don't miss your RMD deadline, because regardless of your account type, the IRS penalty may be severe—50% of the amount not taken on time.

Taxes:
The IRS taxes RMDs as ordinary income. This means that withdrawals will count toward your total taxable income for the year, and they will be taxed at your applicable individual federal income tax rate and may also be subject to state and local taxes.

If you made after-tax contributions to your IRA (such as in a traditional IRA), you must calculate your RMD based on the total balance, but your taxable income may be reduced proportionately for the after-tax contributions.

Keep in mind that this income increase may push you into a higher tax bracket and may impact the taxes you pay for your Social Security or Medicare.