What is a Required Minimum Distribution (RMD)?
A required minimum distribution (RMD) is the minimum amount the IRS mandates you to withdraw from certain tax-deferred retirement accounts every year once you reach a specific age. The exact amount varies based on your account balance and life expectancy as determined by IRS guidelines.
By enforcing RMDs, the IRS ensures that taxpayers don't defer their taxes indefinitely. As you withdraw your RMD, those funds become a "taxable event" and are generally taxed as ordinary income at the federal and state levels.
How to Use This RMD Calculator
Calculating your distribution manually can be tedious. Our RMD Calculator streamlines the process:
- Enter your year of birth: This helps determine your age for the specified distribution year.
- Select the Year of RMD: Choose the year for which you are calculating the distribution.
- Input your Account Balance: Provide the balance of your retirement account as of December 31st of the previous year.
- Spouse Beneficiary details: Indicate if your spouse is the primary beneficiary. If yes, enter their birth year (if they are more than 10 years younger, different IRS tables may apply).
- Estimated Rate of Return: Optional. Enter an expected annual return to see a projection of your future balances.
The Formula and Guidelines
The calculation for your RMD follows a straightforward formula set by the IRS based on Publication 590-B.
Account Balance: As of December 31 of the prior year.
Distribution Period: Found on the IRS Uniform Lifetime Table (or Joint Life Table if applicable).
For example, if you are 75 years old, the IRS Uniform Lifetime Table dictates a distribution period of 24.6 years. If your previous end-of-year balance was $300,000, your calculation would be: $300,000 / 24.6 = $12,195.12.
Frequently Asked Questions
You are required to take your first RMD by April 1 of the calendar year after you turn 73. This age was increased from 72 due to the SECURE 2.0 Act in December 2022. It is scheduled to increase again to age 75 in 2033.
Failing to take your required distributions results in strict penalties. The IRS generally charges a 25% excise tax on the undistributed amount. However, if the mistake is corrected in a timely manner, the penalty can often be reduced to 10%.
Most tax-advantaged accounts require RMDs, including Traditional IRAs, SEP IRAs, SIMPLE IRAs, Rollover IRAs, Traditional 401(k) plans, 403(b) and 457(b) plans. Notably, Roth IRAs generally do not require RMDs during the original owner's lifetime.
Yes, you must calculate the RMD for each account individually. However, for certain accounts like Traditional IRAs or 403(b)s, you can calculate the total required across all identical accounts and withdraw the consolidated amount from just one account. 401(k)s require separate withdrawals per account.
The rate of return doesn't change your current year's RMD calculation. However, it applies growth to your remaining balance. The calculator applies the return rate to your starting balance before subtracting the end-of-year RMD to accurately project your future balances.