Simple definition
A required minimum distribution, or RMD, is the smallest amount the IRS makes you withdraw each year from certain tax-deferred retirement accounts once you reach a set age. Because that money grew untaxed for decades, the government eventually wants its share. Think of it as the bill coming due on a long tax holiday. You can always take out more, but never less than the required amount.
Why it matters
Missing an RMD triggers one of the steepest penalties in the tax code. Beyond avoiding that, RMDs can push you into a higher tax bracket, so planning withdrawals ahead of time helps you keep more of what you saved.
Real-life example
Suppose you must take an RMD and your account balance and IRS life-expectancy factor produce a required $10,000. You withdraw at least that much and pay ordinary income tax on it.
Formula
RMD = prior year-end account balance ÷ IRS life-expectancy factor for your age
Common mistakes
- Forgetting to take the withdrawal by the deadline.
- Assuming Roth IRAs require the same lifetime withdrawals.
- Miscalculating across multiple accounts.
- Ignoring the tax hit from a large forced withdrawal.
Pro tips
- Mark your first RMD deadline as soon as you approach the age.
- Ask your custodian to calculate the amount for you.
- Consider a qualified charitable distribution to lower the tax.
- Plan withdrawals across the year, not all in December.
Related Money Dictionary terms
- Traditional IRAA retirement account where contributions may lower your taxable income now and you pay tax when you withdraw later.
- 401(k)A retirement account through your job, often with an employer match — free money for saving.
- Qualified Charitable DistributionA transfer of money directly from your IRA to a charity that can satisfy your required withdrawal without added tax.
- Roth ConversionMoving money from a pre-tax retirement account into a Roth account and paying the taxes now for tax-free growth later.
- Tax-Deferred GrowthInvestment gains that build up untaxed inside a retirement account until you withdraw the money later.
- Retirement AgeThe age at which you choose to stop working, which affects your savings, Social Security timing, and Medicare eligibility.
Frequently asked questions
When do I have to start taking RMDs?
The starting age is set by law and has shifted in recent years, so confirm the current age with the IRS or a tax pro rather than relying on an old number. Once you hit that age, RMDs apply to traditional IRAs and most workplace plans each year.
Do Roth accounts have RMDs?
Roth IRAs don't require withdrawals during the original owner's lifetime, which is a major planning advantage. Rules for Roth workplace accounts have changed, so check current guidance. Because you already paid tax on Roth contributions, the government isn't waiting to tax the growth the same way.
What if I forget to take my RMD?
The penalty for missing an RMD is severe, historically a large percentage of the amount you should have withdrawn, though it can be reduced if you correct the mistake promptly. If you slip up, withdraw the shortfall right away and ask a tax pro about requesting relief.
Knowing what Required Minimum Distribution (RMD) means is knowledge — the first half. A brick gets placed when you act on it: note the age RMDs begin for you and set a reminder before that year.
Also builds: Taxes
Sources & references
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Plain-English education — not personalized legal, tax, or investment advice.