Let us help you calculate the required minimum distribution (RMD) from your retirement funds. We’ve broken down the calculations for you to better calculate your RMD and avoid any tax penalties.
How to calculate your RMD
Calculate your RMD in four steps:
Using the IRS Uniform Lifetime Table below, locate the distribution period by your age.
Determine your IRA or other retirement account balance as of December 31 of the year before.
Divide your account balance by your distribution period.
Repeat this calculation for each account that requires an RMD.
IRS Uniform Lifetime Table
Age
Distribution period in years
72
27.4
73
26.5
74
25.5
75
24.6
76
23.7
77
22.9
78
22.0
79
21.1
80
20.2
81
19.4
82
18.5
83
17.7
84
16.8
85
16.0
86
15.2
87
14.4
88
13.7
89
12.9
90
12.2
91
11.5
92
10.8
93
10.1
94
9.5
95
8.9
96
8.4
97
7.8
98
7.3
99
6.8
100
6.4
101
6.0
102
5.6
103
5.2
104
4.9
105
4.6
106
4.3
107
4.1
108
3.9
109
3.7
110
3.5
111
3.4
112
3.3
113
3.1
114
3.0
115
2.9
116
2.8
117
2.7
118
2.5
119
2.3
120+
2.0
Exceptions to calculations
The base calculation for your RMD is the following:
Account balance Distribution period = RMD
If you have one IRA or qualifying retirement account
Divide your account balance by your distribution. For example, if your account balance as of December 31, 2023, is $20,000, your age as of 2024 is 75 and your distribution period is 24.6, your RMD is $813.01.
20,000 / 24.6 = 813.008
If you have multiple retirement accounts that require RMDs
You must calculate the RMD for each account by dividing your account balance by your distribution. But you don’t have to withdraw the amounts from each account to satisfy your annual RMD. You may choose to combine the RMD amounts and withdraw from only one account. For example:
If you have multiple accounts, you would use the same intersecting distribution period to calculate each account and then combine for the total amount you must withdraw for the year.
What if my beneficiary isn’t my spouse?
You have 10 years to take your money out if your beneficiary isn’t your spouse, according to Rubina Hossain, Certified Financial Planner at Annuity.org. “This is one of the biggest changes in the Secure Act, there is no longer the ability to “stretch” beneficiary IRAs over one’s lifetime for certain designated non-spouse beneficiaries. But if the beneficiary isn’t 10 years younger than the original deceased account owner, then they’re able to utilize the “stretch” IRA, which is to take the RMD amount over to the beneficiary’s lifetime or the five-year rule,” explains Hossain.
What RMD rules apply if I inherited an IRA?
Prior to the passage of the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act, you could stretch out inherited IRA distributions over your lifetime. But the new rules require nonspouse inheritors to take distributions that drain the account within 10 years of the account holder’s death. Basically, you now have 10 years to pay the taxes on any inherited tax-advantaged retirement accounts.
What is the required minimum distribution?
RMD is the minimum amount you’re required to withdraw from tax-advantaged retirement accounts each year until you pass away or the retirement fund is depleted. The RMD applies to most accounts starting at age 72. Roth IRAs do not require withdrawals until after the owner’s death, but beneficiaries of a Roth IRA are subject to the RMD rules. Designated Roth accounts in a 401(k) or 403(b) plan must follow the RMD rules for 2022 and 2023. However, for 2024 and later years, RMDs are no longer required from designated Roth accounts. 2023 RMDs due by April 1, 2024, are still required.
Does my plan require an RMD?
Most tax-advantaged retirement plans require an RMD, but there are a few nuances, depending on when you retire and how much of your employer’s company you own.
Retirement account
Requires RMD?
Age
Traditional IRA
Yes
72
SEP IRA
Yes
72
Simple IRA
Yes
72
401(k)
Yes
72 or the first year after retirement, whichever is later
403(b)
Yes
72
457(b)
Yes
72
Profit-sharing plan
Yes
72
Employer contribution plan, and you own 5% or more of the company
Yes
72, regardless of when you retire
Roth IRA
No
—
Roth 401(k)
Yes
72
What’s the RMD deadline?
You must take your first annual RMD by April 1 of the year after you qualify. For example, if you turn 72 on December 15, 2024, you must take your RMD for the year by April 1, 2025. Every year after, you must take your entire RMD by December 31.
If you don’t take any distributions, or if the distributions don’t meet your calculated requirement, you’ll be subject to an excise tax on the amount not distributed.
What happens if I miss my RMD?
If you don’t take a distribution for the year or take less than the RMD amount, you’re taxed 50% of the undistributed RMD. For example, if you’re required to take out $2,000 for the year, but you only take out $1,000, you’re subject to a 50% tax on the remaining $1,000.
How do I take my RMD?
After your first year, you can choose to withdraw your RMD as one large payment or set up smaller month-to-month automatic payments. Receive your RMD payment in one of the following ways:
Check. Get a check in the mail.
ACH Transfer. Get your funds transferred directly into your bank account.
Automatically reinvest. Roll the funds into a pretaxed investment account.
Or, elect to have your taxes withheld from the withdrawals before they’re sent to you. If you choose not to, make sure that the RMD tax amount won’t result in an IRS underpayment penalty.
How can I avoid or reduce my RMD?
You can’t avoid or reduce the amount of your RMD. But if you don’t need the money for your retirement living expenses, there are ways to reduce the taxes you pay on your withdrawals.
Reinvest the money. You can’t reinvest into traditional tax-advantaged retirement accounts, but you can invest in taxable brokerage accounts, such as exchange-traded funds (ETFs), municipal bonds or long-term stocks that pay qualified dividends.
Roth IRA. Roll your traditional IRA funds into a Roth IRA and pay taxes on the money as you convert it. If you do this slowly over the span of a few years, you can minimize the impact it will have on your annual taxes, and any money you withdraw from your Roth IRA in the future is tax-free.
Give to charity. Make a qualified charitable distribution of up to $100,000 annually straight from your IRA to the charity of your choice. Using this method, the distribution doesn’t count as part of your gross income for the year and doesn’t interfere with the deductions limits on your other charitable giving.
Gift the money to heirs. Use the money to fund a college savings account or Roth IRA — the money becomes part of your family inheritance.
Bottom line
It’s wise to understand what kind of distribution you’re required to take and plan what to do with the money. To get a better idea of what you can do with your accounts and what your options are, compare retirement savings accounts to find out what will work best for your retirement.
Heather Petty is a personal finance writer at Finder, specializing in home and personal loans. After falling victim to a disreputable mortgage broker when buying her first home, she’s on a mission to help readers avoid similar experiences when managing their own finances. A self-proclaimed word nerd, her writing and analysis has been featured on MSN, Credit.com and MediaFeed, among other top media. Heather previously worked as a technical writer and editor for the casino systems industry and is an internationally published young adult mystery author. She earned a BA in English with a minor in journalism from the University of Nevada, Reno.
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