1. What is Required Minimum Distribution?

Required Minimum Distribution (RMD) is the minimum amount that must be withdrawn annually from traditional IRA and employer-sponsored retirement accounts once the account holder reaches age 72 (or 70½ if born before July 1, 1949).

2. How Does the Calculator Work?

The calculator uses the RMD formula:

Where:

• \( B \) — Account balance (currency units)
• \( L \) — Life expectancy factor (years)

Explanation: The formula divides your retirement account balance by your life expectancy factor to determine the minimum amount you must withdraw each year.

3. Importance of RMD Calculation

Details: Calculating RMD accurately is crucial to avoid IRS penalties, which can be as high as 50% of the amount that should have been withdrawn. Proper RMD calculation ensures compliance with tax laws while managing retirement income.

4. Using the Calculator

Tips: Enter your account balance in currency units and your life expectancy factor in years. Both values must be positive numbers. The life expectancy factor is typically found in IRS Publication 590-B Appendix B based on your age.

5. Frequently Asked Questions (FAQ)

Q1: When must I start taking RMDs?
A: You must start taking RMDs from your traditional IRA by April 1 of the year following the year you turn 72 (or 70½ if born before July 1, 1949).

Q2: How is the life expectancy factor determined?
A: The IRS provides life expectancy tables in Publication 590-B. The factor is based on your age and is recalculated each year.

Q3: What happens if I don't take my full RMD?
A: The IRS imposes a hefty penalty of 50% of the amount that should have been withdrawn but wasn't.

Q4: Can I withdraw more than the RMD?
A: Yes, you can always withdraw more than the required minimum, but you cannot apply the excess to future year's RMDs.

Q5: Are RMDs required from Roth IRAs?
A: No, Roth IRAs do not require minimum distributions during the owner's lifetime.