Required Minimum Distribution
If you have reached the age of 72, then you have reached the age of required minimum distribution (RMD). An RMD is a mandatory withdrawal from one of the following accounts:
- employer-sponsored retirement plan
- traditional individual retirement account (IRA)
- SEP IRA
- SIMPLE RA
- Inherited IRA
- Qualified retirement plan participants
Account holders must begin withdrawing from a retirement account by April 1, following the year they reach age 72. Each year following the account owners must continue to take a withdrawal to avoid tax consequences. The amount you must take is based on an RMD calculator. It is recommended that you meet with your financial professional to ensure that you take proper distributions because different account types require different amounts. For example, if you have an inherited IRA, the rules can be different for a surviving spouse, minor child, or disabled individual.
What happens if you do not take the withdrawal from your account? If you are over age 72 or have an inherited IRA and choose not to take your RMD, you will be penalized by the IRS with a 50% penalty on the withdrawal amount.