A required minimum distribution is a mandatory distribution of retirement account funds after you reach a certain age.  (Age 70 1/2 for anyone who turned 70 ½ prior to January 1st, 2020 and age 72 for everyone else)

The RMD calculation is based on your account balance as of the end of the immediately preceding calendar year divided by the distribution period from the pertinent IRS table. 

The following retirement plans are subject to the RMD rules: traditional IRAs, SEP IRAs, Simple IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit-sharing plans, and other defined-contribution plans.  However, ROTH IRAs do not require withdrawals until after the death of the owner.

The beginning date for your first required minimum distribution is as follows:

  1. IRAs (including SEPS and SIMPLE IRAs)
    • April 1st of the year following the calendar year in which you reach age 70 ½, if you were born before July 1, 1949.
    • April 1st of the year following the calendar year in which you reach age 72, if you were born after June 30, 1949.
  2. 401(k), profit-sharing, 403(b), or other defined contribution plan – generally, April 1st, following the later of the calendar year in which you reach age 72 (age 70 1/2 if born before July 1, 1949) or retire (if your plan allows this).

However, you can make your first withdrawal by December 31st, instead of waiting until April 1st of the following year, which would allow each year’s distribution to be included in your income in separate tax years.

RMDs in subsequent years must be withdrawn by December 31st.

If you do not take any distributions, or the distributions that you take are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required.