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Glossary  /  Retirement Accounts
GLOSSARY · RETIREMENT ACCOUNTS

Required Minimum Distribution (RMD)

Required Minimum Distribution (RMD): the minimum amount the IRS requires you to withdraw each year from tax-deferred retirement accounts (like a traditional 401(k) or IRA), starting at a specific age set by law. The withdrawal is taxed as ordinary income whether or not you actually need the money that year.

Why it matters for your retirement paycheck

RMDs aren't optional, and missing one carries a real penalty. They can also push a retiree into a higher tax bracket or trigger Medicare IRMAA surcharges in a year they weren't expecting it, simply because the withdrawal is forced regardless of other income. Planning around RMDs before they start — sometimes through strategic Roth conversions in earlier, lower-income years — can reduce the size of that forced income later.

An example

Say you have $500,000 across your traditional IRAs at the end of last year and you turn 73 this year. The IRS Uniform Lifetime Table divisor at 73 is 26.5, so your RMD is about $500,000 ÷ 26.5 ≈ $18,868, taxed as ordinary income. Under current law RMDs generally begin at 73, rising to 75 for those born in 1960 or later. Illustrative figures only.

Related terms

DecumulationRoth ConversionSafe Withdrawal RateSequence-of-Returns Risk
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Blueprint Tomorrow provides educational planning tools, not individualized investment, tax or legal advice. Nothing on this page is a recommendation to take any specific action with your accounts.