Understanding Required Minimum Distributions

Certainly by the time you are within five years of retirement, if not sooner, you should be developing an order of withdrawal plan for your various retirement accounts. A part of that withdrawal plan will include your Social Security pension and it would behoove you to be aware of the RMD requirement.

RMD Requirement

Even if you are quite a few years away from retirement, you need to be aware of this requirement and perhaps sharing this information with your parents or grandparents as they approach 70½ years of age.

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In short, Required Minimum Distributions (RMD) is a condition imposed on retirement accounts by the Internal Revenue Service (IRS).

Subjected Plans

The RMD is the amount the IRS mandates the owner of an individual retirement account must withdraw each year. Traditional IRAs, SEP and SIMPLE accounts, as well as employer sponsored retirement plans, such as 401(k) plans are subject to RMD.

The RMD minimum IRA distribution begins once the qualified account owner reaches age 70½. At that age, IRA withdrawals are required to begin no later than April 1 of the following year.

One caveat, if you are still working at 70½ and still contributing to a defined contribution plan such as a 401(k) or 403(b), you can postpone your RMD. Provided that you do not own more than five percent of a company and your retirement plan permits it, you can delay the RMDs until April 1 after the year that you leave the service of that company.

Keep in mind however, that the delay only applies to the 401(k) plan of the company for which you are still working. If you have other 401(k) benefits from previous employers, you will still be required to take your RMD from those accounts at 70½.

RMD Calculator | Financial Industry Regulatory Authority [FINRA]

Your best course of action is to research the latest information and your options on the IRA website, or discuss with a financial planner if you find yourself in this situation as you approach 70 years of age.

It is often stated that Roth IRAs are not subject to Required Minimum Distributions. That is not completely accurate. While Roth IRAs are not subject to Required Minimum Distributions during the owner’s lifetime (the most valuable attribute of the Roth IRA to many), they are subject to RMD after the owner’s death. Please visit the IRS website for the latest information and any changes to the RMD.

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.


  1. That’s very informative, thanks for sharing this.

    • Glad you found the information useful, my friend.

  2. Thanks for the info. One of Garrett’s co-workers incurred a penalty because of this. I’ll have to check in with some other folks we know and spread the word to make sure they’re aware. Thanks again!

    • I’m not surprised at the number of people who aren’t aware of the requirement. I suspect it is because most people are in a position where they have to draw down the impacted accounts well before 70½ and it never becomes a concern.

  3. My grandpa had this happen to him recently. He’s the kind of guy who will never stop working because he can’t stand being at home. He owns about 30% of the company he works for and doesn’t opt in to social security. They required him to take distributions from his IRA so he’s donating it to charity. He’s got plenty saved. The man has too many retirement incomes. Good problem to have.

    • “The man has too many retirement incomes. Good problem to have.” Indeed. Regular readers of this blog know that I am a huge advocate for generating multiple streams of income, both during the working and retirement years. Multiple streams gives you choices … and choices are good!

      Thanks for stopping by and sharing your thoughts, Elsie.

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