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Required minimum distributions (RMDs) are the amounts that must be withdrawn from most tax-deferred retirement savings accounts on an annual basis beginning.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.
 

Retirement Rules


Related Articles
  1. Your Clients

    Tips on How to Delay RMDs for Working Clients

    Qualified plan participants who work past age 70½ can delay taking required minimum distributions if they qualify. Here's how.
  2. Financial Advisors

    Top Tips to Reduce Required Minimum Distributions

    A look at the best strategies to reduce required minimum distributions from qualified retirement accounts.
  3. Saving and Spending

    What Baby Boomers Need to Know About IRA RMDs

    Mandatory minimum distributions from traditional IRAs and qualified plans cannot be avoided. But there are several ways to minimize their impact.
  4. Your Clients

    Why Age 70 is Pivotal for Retirement Planning

    Age 70 marks the time that you will have to start thinking about RMDs for real, but it's better to start planning for them much sooner.
  5. Retirement

    Retirement Plan Solutions For 70+ Workers

    If you’re still working in your 70s, you’re probably trying to seal a crack in your nest egg, or you just don’t want to retire.
  6. Retirement

    Inheriting an IRA: Tax Rules You Should Know

    Don’t get hit with a 50% penalty because you don’t know the required minimum distribution (RMD) rules for IRA beneficiaries.
  7. Professionals

    Retirement Rules

    Retirement Rules
  8. Financial Advisors

    Top Tips for Advising Clients on RMD Strategies

    Required minimum distributions are a fact of life for those 70.5 and older. Here's how to implement the best strategies for clients.
  9. Retirement

    How an IRA Works After Retirement

    You've read a lot about saving for your future retirement with IRAs. But what happens to the account when the future is here, and you actually retire?
  10. Professionals

    Taxation of Distributions

    Taxation of Distributions
RELATED TERMS
  1. Required Minimum Distribution - ...

    The amount that Traditional, SEP and SIMPLE IRA owners and qualified ...
  2. IRA Plan

    A plan that individuals may establish to arrange and plan for ...
  3. Eligible Rollover Distribution

    A distribution from an IRA, qualified plan, 403(b) plan or 457 ...
  4. Roth IRA

    An individual retirement plan that bears many similarities to ...
  5. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  6. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
RELATED FAQS
  1. Is an IRA a qualified plan?

    Learn about the definition of a qualified retirement plan and some of the features and benefits of individual retirement ... Read Answer >>
  2. What is the difference between a ROTH, SEP and Traditional IRA?

    The Roth IRA was established in 1996 as the newest addition to the individual retirement accounts (IRAs) available to individuals. ... Read Answer >>
  3. What are the rules when applying a stretch IRA strategy?

    Learn how to apply a stretch strategy to IRA and Roth IRA plans, and how tax-advantaged compounding may provide income for ... Read Answer >>
  4. Are variable annuities subject to required minimum distribution (RMD)?

    Learn how required minimum distributions (RMDs) affect your variable annuity contract and how to choose benefits that play ... Read Answer >>
  5. Why should I open an IRA?

    Understand the benefits of an IRA, how it enables you to increase retirement savings and how funds can be used before retirement ... Read Answer >>
  6. Are the distribution rules for 401(k) and 403(b) plans the same as those for IRA ...

    The distributions are different for IRAs, qualified plans and 403(b) plans.For IRAs, qualified plans (such as 401(k), money ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center