CFP

Distribution Rules, Alternatives And Taxation - Required Minimum Distributions

Required Minimum Distributions
Required minimum distributions (RMDs) are the amounts that must be withdrawn from most tax-deferred retirement savings accounts on an annual basis beginning. In most cases, RMDs must begin by April 1 following the year retirement plan participants reach age 70.5. Ordinary income tax must be paid on those withdrawals.

RMDs apply to the following type of plans:


  • Traditional IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • Qualified plans, including 401(k) plans
  • 403(b) plans
  • 457 plans
  • SIMPLE 401(k)s
There are no RMDs for Roth IRAs, but they are required for any type of employer-sponsored Roth plan.

These RMDs are determined by dividing the prior year-end fair market value (FMV) of the retirement account by the applicable distribution period or life expectancy.

Some qualified plans will allow certain participants to defer beginning their RMD until they retire, even if they are older than age 70.5. Qualified plan participants should check with their employer to determine whether they are eligible for this deferral.



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