Required Minimum Distributions

What is an RMD?

A Required Minimum Distribution is the minimum annual amount that must be withdrawn from tax-deferred (qualified) accounts after an individual turns 70 I/2. RMDs are a way for the government to recoup the taxes that have been deferred for years, perhaps decades, in individual investors’ tax-deferred retirement accounts.

What accounts are subject to RMD?

 Any traditional IRA, SIMPLE IRA, SEP IRA or other tax-deferred retirement account, such as a 401(k), 403(b), Profit Sharing Plan, or Deferred Compensation Plan. Roth IRAs are not subject to RMDs.

When do I have to begin taking my RMD?

 When an individual turns 70 1/2 (6 months after their 70th birthday) they must begin taking distributions from their qualified account(s). They have until April 1st following their “half birthday” to take the first distribution. After that, it must be taken annually before year end.

 How are RMD amounts calculated?

 RMDs are calculated using a formula that includes age, life expectancy and the total dollar value of all tax-deferred retirement accounts. RMDs are calculated by an investment adviser or account custodian.

 What are the options for receiving RMD payouts?

 If the funds will be consumed by the account owner, the RMD payouts can be sent directly to the investor. If the funds aren’t needed, the money can be deposited into an after-tax investment account and re-invested.

How much tax is paid on RMDs?

 RMD payouts are considered taxable income and are taxed at ordinary income tax rates.


At MCM, we help clients determine the best RMD strategy for their personal situation. When the time comes to begin taking an RMD, we’ll discuss your withdrawal options with you, and take care of the withdrawal for you.

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