What You Need to Know About Required Minimum Distribution

Required Minimum Distribution (RMD) is a mandatory annual withdrawal for individuals with tax-deferred retirement accounts (e.g., Traditional IRAs, 401(k)s) starting generally at age 72.

To calculate Required Minimum Distribution (RMD), divide the previous year-end retirement account balance by the applicable distribution period factor from the IRS Uniform Lifetime Table.

SECURE Act 2.0 extended the RMD age to 73 for those turning 72 after Dec. 31, 2022, and to 75 for those turning 74 after Dec. 31, 2032.

Receive Form 1099-R detailing RMD by January 31 of the following year. Complete Form 1040, reporting total distribution and taxable amounts.

Failure to take the required distribution results in a 50% tax penalty on the undistributed amount, in addition to regular income tax. IRS Form 5329 is used to report and calculate the penalty.

Initial RMD must be taken by April 1 of the year following turning 72 (or 73 after Dec. 31, 2022). Subsequent RMDs must be taken by December 31 each year to avoid penalties.

Certain exceptions to Required Minimum Distributions (RMDs) include the "still working" exception for employer-sponsored plans and the spousal exception for inheriting an IRA.

How to Calculate and Report Required Minimum Distribution ?