IRS Required Minimum Distributions


Retirement plans, like IRAs and 401(k) plans, allow you to save for your future. However, if you don’t follow required minimum distribution rules, you might receive tax penalties for not starting to withdraw your money by a certain age.

Required Minimum Distribution (RMD) Requirements for IRAs

Let’s start with the IRS Required Minimum Distributions (RMD). You must begin 401(k) or Traditional IRA withdrawals by April 1 of the year after the year you reach age 70 1/2. You’ll have a 50% penalty on the amount not distributed if you don’t withdraw the required minimum distribution per IRS rules. 

If your 70th birthday occurs between January and June, you’ll turn age 70 1/2 before the end of that year. You must take your required minimum distribution from your IRA by April 1 of the next year. However, you might want to take your first distribution in the year you turned age 70 1/2. This way, you won’t have to take two distributions in the next calendar year.

If your 70th birthday is after June 30, your first RMD requirement would be the next year. You could wait until April 1 of the next year to take it.

Minimum withdrawal amounts are based on life expectancy. So, first figure your required minimum distribution using IRS life expectancy tables. Then, you can take the full amount from just one account or from several accounts.

What if you don’t need the money in your 401(k)? Is a rollover a possibility for avoiding a penalty?  Unfortunately, no. IRS required minimum distributions aren’t eligible for rollover. You must pay tax on them. 

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