Tax Planning & Retirement
Required Minimum Distributions
One benefit of traditional Individual Retirement Accounts (IRAs) and 401ks is their tax deferred nature.
- 01
Contributions
typically pre-tax
- 02
Growth
tax-deferred: no tax on gains, interest, & dividends while assets are in the account
- 03
Withdrawals
typically taxed as ordinary income at the taxpayer's marginal rate
Tax Deferral Doesn't Last Forever
At some point, account owners are required to withdraw a minimum amount. This amount is referred to as the Required Minimum Distribution (RMD). Just like any withdrawal from a traditional IRA or 401k, an RMD is taxed as ordinary income at the taxpayer's marginal rate.
When do RMDs start?
For many years, RMDs started the year someone turned 70.5. This changed with the passage of the SECURE Act and SECURE 2.0 Act.
How much is my RMD going to be?
The RMD is calculated by dividing the account balance as of December 31st in the year before the distribution by a number in an IRS-provided table that's associated with how old the account owner will be in the year of the distribution.
Folks who reach RMD age and are still working may not need to take an RMD from their 401k, but they will need to do so for any IRAs they own. RMDs continue for the life of the account owner.
Your own numbers
Start ages and the amount itself depend on your birth year, your accounts and the current IRS tables. Rather than publish figures that move, we would rather work yours out with you.
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