Required minimum distributions are the amounts the IRS requires you to withdraw annually from traditional IRAs and most employer plans once you reach the required beginning age set by current law. The amount is based on your account balance and an IRS life-expectancy factor.
Missing or underpaying an RMD can trigger a significant IRS penalty, so timing and amount matter. Roth IRAs are generally not subject to RMDs during the original owner's lifetime.
Example
At the required age, a retiree calculates their RMD from a traditional IRA and withdraws at least that amount before year-end to avoid a penalty.
This definition is for general educational purposes only and is not financial, tax, or legal advice. Tim Hartle is an independent insurance professional. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company and are not FDIC insured. Rules and product features vary by situation and by state. Please consult a qualified advisor about your own circumstances.