Quick Definition

Required Minimum Distribution (RMD) refers to the minimum amount that retirees must withdraw annually from their retirement accounts, such as IRAs and 401(k)s, starting at a certain age.

Formula

Examples

• 1A 72-year-old retiree with an IRA valued at $100,000 must calculate their RMD based on IRS life expectancy tables to determine the minimum withdrawal for the year.
• 2A retiree fails to take their RMD by the deadline and faces a 50% penalty on the amount not withdrawn as required.
• 3A financial advisor helps a client strategize RMD withdrawals to minimize tax liabilities while ensuring compliance with IRS rules.
• 4A retiree uses their RMD to fund annual living expenses, reinvesting any excess into a taxable account for further growth.

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