Required Minimum Distribution

A required minimum distribution from tax advantaged retirement accounts must be started in the year a person reaches age 70 1/2, per IRS rules.

This minimum required distribution can cause an increase in taxes on retirement income if the minimum distribution amount causes a significantly higher income.

For more detailed info, visit the IRS website and search for "required minimum distribution."

The Internal Revenue Service (IRS) rules for retirement accounts specify that beginning at age 70 1/2, there is a minimum required distribution or withdrawal amount to be taken from retirement accounts such as IRAs and 401(k)s, for example, and others.

These rules do not apply to Roth IRAs for the original owner.

These required distributions will be taxed along with other income at the taxpayer's normal income tax rate.

Some people who are not retired by age 70 1/2 may not need to take withdrawals. For more information see the IRS website or contact your payroll office to find out about your specific situation.

If the required minimum distribution amount is not withdrawn as described by the IRS rules, there is a penalty in the amount of 50% of the amount not withdrawn.

The required minimum distribution rule applies to all retirement accounts individually. For the original owner of the account, the account balance as of December 31st of the prior year is divided by a life expectancy factor from the IRS Uniform Lifetime Table. The result is the RMD for that account.

There are different tables (I and II) for beneficiaries who inherit retirement accounts and for couples where one spouse is 10 years or more younger than the IRA owner.

The Required Minimum Distribution Factor Tables

Here are the 3 table descriptions for determining required minimum distribution (RMD) amounts, which can be found in IRS publication 590.

  • Table I for beneficiaries (inherited IRA accounts)
  • Table II for owners whose spouse is more than 10 years younger
  • Table III for original owners and whose spouse is not 10 years younger or whose spouse is not the beneficiary.

The tables are available here: in IRS publication 590.

Examples of Required Minimum Distribution (RMD) Calculations

Example A

An IRA owner age 72 had an account balance of $160,000 as of December 31st. According to Table III, Uniform Lifetime Table in Publication 590, the distribution period factor is 25.6. To determine the required minimum distribution for the current year, we divide the IRA balance by the factor and get the minimum dollar amount that should be withdrawn this year, which comes to $6,250.

Example A Summary
Original owner, age 72
IRA balance on Dec 31 $160,000
Factor from the table III 25.6
160000/25.6 = $6250

Example B

This person, age 42, inherited an IRA from a parent which had a balance of $90,000 on December 31st. For beneficiaries, Table I, Single Life Expectancy is used to find the life expectancy factor. Divide 90,000 by 41.7 to get the RMD of $2158.27 for the current year.

Example B Summary
Inherited IRA, age 42
IRA balance on Dec 31 $90,000
Factor from table I 41.7
90000/41.7 = $2158.27

Example C

The IRA owner age 72 has a younger spouse more than 10 years younger, age 49. In this case, Table II, Joint life and Last survivor expectancy applies. The IRA balance on 12/31 was $90,000 and the factor is 35.8 giving an RMD amount of $2519.97.

Example C Summary
Original owner, age 72 with spouse more than 10 years younger, age 49
IRA balance on Dec 31 $90,000
Factor from table II 35.8
90000/35.8 = $2519.97

Other Points to Know

  • You cannot carry over a large withdrawal in one year to cover a required minimum distribution in a later year.
  • The minimum required distribution can be taken in installments or occasional withdrawals as long as the total is at least the amount of the RMD.
  • The Required Minimum Distribution (RMD) amount is calculated for each IRA or 401(k) account, but the amount withdrawn can come from one or all of the accounts.

As is usually the case with tax law, there are finer points, additional details, and exceptions that are not covered on this page.

You should study the rules on the IRS website or consult a tax or retirement financial expert for specific advice for your situation.


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