Required Minimum Distribution (RMD) sometimes also known as Minimum Required Distribution (MRD) is an Internal Revenue Service (IRS) regulation that requires individuals, beginning in the calendar year following the year they turn 70½ to start withdrawing a minimum amount of money from their retirement accounts (e.g. Traditional, SIMPLE, and SEP IRAs ). You must take this distribution each year. However, you can defer your current year's distribution until April 1st of the next year. If you defer it to the next year, then next year you will be required to take 2 distributions: one for this year and the other one for the next year. Each year's MRD is determined by dividing the market value of your tax-deferred retirement account(s) as of December 31 of the prior year, by an applicable life expectancy factor taken from the Uniform Lifetime Table.

In certain cases, you may be able to delay taking distribution from a tax deferred retirement account past age of 70½. For example, if you are not more than 5% owner in the firm you work for, you can delay taking distribution from your retirement account until April 1st of the year following the year of your retirement. As an illustration if you retire on March 10th this calendar year, you must take your MRD latest by April 1st of the following year.

Here is a list of steps to determine your RMD. Perform these steps for each one of your tax deferred IRAs (Traditional, SEP, and SIMPLE).

- Identify the calendar year in which you are turning 70½. This determines whether you will be required to take RMD in the current year or next year. If your birthday is between January 1st and June 30th, the first year of distribution would be in the year you turn 70 (latest by April 1 of the following year). If your birthday is between July 1st and December 31st, the first year of distribution would be at age 71 i.e. next year.
- Determine the account balance to use for calculation: Based on step 1, if you are required to take the distribution this year then you will use the balance as of 12/31 of the prior year. If you are required to take the distribution next year then you will use the account balance as of 12/31 this year.
- Age for RMD Calculation: Determine your age as of 12/31 of the year for which you are taking distribution. So if your birthday is between January 1st and June 30th and you turned 70 this year, you will be turning 70 ½ this year only. So you will calculate your age as of 12/31 this year which is 70. But if your birthday is between July 1st and December 31st and you are turning 70 this year, then you will not be turning 70½ until next year. In that case you will use your age as of 12/31 of next year which is 71.
- RMD Divisor: Using ‘Uniform Lifetime Table’ (IRS Publication 590) determine your distribution factor for the age determined in step 3. This is RMD divisor. If your spouse is more than 10 years younger to you then you will use Joint Life and Last Survivor Expectancy Table to determine the divisor factor. In which case it will have a higher value.
- RMD Amount: Divide the account balance in step 2 by RMD divisor determined in step 4. This is your RMD amount that you need to withdraw.
- You can determine your RMD for other years by going through these steps. Once you go past your first RMD distribution, you basically pick the account balance and age subsequent to the ones you used for last RMD calculation.

Wage based Retirement Savings

Traditional and Roth IRA Planner

Retirement Income Tools

Sust. Retirement Income Planner
Required Minimum Distribution