A required minimum distribution is the amount of money that must be withdrawn from an employer-sponsored retirement plan, traditional IRA, SEP, or SIMPLE individual retirement account by owners and qualified retirement plan participants of retirement age.
A required minimum distribution acts as a safeguard against people using a retirement account to avoid paying taxes.
RMDs are determined by dividing the retirement account’s prior year-end fair market value by the applicable distribution period or life expectancy.4
The Internal Revenue Service has a worksheet to help taxpayers calculate the amount they must withdraw.5 Generally, your account custodian or plan administrator will calculate these amounts and report them to the IRS.