Required Minimum Distribution (RMD)

November 06, 2020

Required Minimum Distribution (RMD)

You’ve turned the magical age of 72 years old. Now what?!


Let’s first address that you may be thinking, “Age 72?  I thought it was age 70 ½?”   This is a fair question! The SECURE Act, which was signed into law December 20, 2019 changed the age to 72.



At age 72, the IRS requires you to start taking your Required Minimum Distribution (RMD). This distribution needs to be taken by December 31st, of the year, in which you turn 72.    


  • The key word to remember is in the title - Minimum!


Accounts requiring RMD’s were funded with pre-tax dollars and were able to defer the taxes until distribution.  The IRS does not want the deferral of taxation to last forever; at age 72 they ‘say’ to investors, “We want some of our tax dollars back. Please take a distribution” by requiring a RMD.      


What accounts are subject to RMD?

All pre-tax accounts are subject to an annual minimum distribution.   



How is a RMD calculated?

The IRS uses the Uniform Lifetime Table to compute an investors RMD amount.  The prior year December 31 account balance is divided by the IRS life expectancy of the investors age.   For example, on December 31, 2019 a 72-year-old has an account balance of $100,000.  The life expectancy at age 72, is 25.6.     $100,000 divided by 25.6 = $3,906.25.  


  • This is minimum distribution requirement; you can certainly take more than the calculated amount.
  • If you are currently taking a systematic distribution which exceeds your RMD, you do not need to do anything!
  • If you have not started taking distributions, or are not meeting the required minimum, you can establish an Automated RMD, which will calculate and distribute at the frequency selected. (Annually, monthly, etc.)
  • Distributions can be direct deposited into your checking or savings account, or mailed to you in the form of a paper check.
  • You may change the frequency or the distribution method at any time.
  • If you need more money in the future, you can increase the distribution amount to meet your needs.


Two additional points of emphasis:

  1. If you do not take your Required Minimum Distribution, you may be subject to an IRS penalty of 50%.
  2. Employer sponsored retirement accounts (403B ,401K, 457) investors must take a distribution from each account. Aggregation of employer sponsored retirement plans is not permissible as it is in an IRA.

If you have any questions, please do not hesitate to give me a call.  




This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice.  If you are seeking investment advice specific to your needs, such advice must be obtained on your own, separate from the educational material.  Content in this material is for general information and is not intended to provide specific advice or recommendations for any individual.   Life expectancy is the same for male, female, East Coast, West Coast.  A separate life expectancy chart is used for married couples with an age difference of 10+ years.  1-05072913