AARP RMD Calculator
Estimate your Required Minimum Distribution (RMD) for retirement accounts.
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Understanding Required Minimum Distributions (RMDs)
Required Minimum Distributions (RMDs) are mandatory withdrawals that individuals must take from certain retirement accounts once they reach a specific age. These distributions are designed to ensure that individuals eventually pay taxes on the money saved in tax-deferred accounts. The rules are set by the IRS, and failing to take your RMD can result in significant penalties.
Who Needs to Take RMDs?
Generally, you need to start taking RMDs from traditional IRA, SEP IRA, SIMPLE IRA, 401(k), 403(b), 457(b) plans, and other employer-sponsored retirement plans. Roth IRAs do not have RMDs for the original owner.
When Do RMDs Start?
The age at which you must start taking RMDs has changed over time due to legislation. Currently, for most individuals, the RMD age begins at 73.
How is the RMD Amount Calculated?
The calculation for your RMD is relatively straightforward. It involves two key pieces of information:
- Your Account Balance: This is the total value of your retirement account as of December 31st of the preceding year.
- Your Life Expectancy Factor: This is determined by your age during the year you are taking the RMD. The IRS publishes life expectancy tables that provide a factor based on your age. For this calculator, you enter your age for the current year, and it uses the appropriate factor from the IRS's Uniform Lifetime Table.
The formula is:
RMD = Account Balance / Life Expectancy Factor
Example Calculation:
Let's say Sarah is 73 years old and her traditional IRA account balance was $150,000 on December 31st of last year.
- Account Balance: $150,000
- Sarah's Age This Year: 73
According to the IRS Uniform Lifetime Table, the life expectancy factor for a 73-year-old is 24.6.
RMD = $150,000 / 24.6 = $6,097.56
Therefore, Sarah's estimated RMD for this year is $6,097.56. She must withdraw at least this amount from her IRA by the end of the year.
Important Considerations:
- IRS Tables: The life expectancy factors are based on IRS Publication 590-B. This calculator uses the Uniform Lifetime Table, which is most commonly used. If your spouse is more than 10 years younger than you and is the sole beneficiary, you might use the Joint Life and Last Survivor Expectancy Table, which could result in a smaller RMD.
- Multiple Accounts: If you have multiple traditional IRAs, you must calculate the RMD for each account separately. However, you can withdraw the total RMD amount from any one or combination of your IRAs. For employer-sponsored plans like 401(k)s, you must take the RMD from each plan separately.
- First-Year RMD Exception: If this is the first year you are required to take an RMD, you have the option to delay your first RMD until April 1st of the following year. However, you will then have to take two RMDs in that following year (your first year's RMD and your second year's RMD), which could result in a higher tax bill.
- Consult a Professional: This calculator provides an estimate. For personalized advice and to ensure you are meeting all IRS requirements, it is always recommended to consult with a qualified financial advisor or tax professional.