Once you reach the age of 73, your retirement accounts are subject to Required Minimum Distributions (RMDs).
Now that you’re enjoying the retirement life, it’s important to stay on top of the guidelines governing your retirement accounts. This includes your RMD—the annual amount you must withdraw from your retirement account(s). Let’s explore how to calculate your RMD so you can ensure you’re making the most of your nest egg.
What is an RMD?
An RMD is the minimum amount you must withdraw from your retirement accounts once you reach the age of 73, with a few exceptions.
Your RMD is a minimum required withdrawal each year, meaning you can of course withdraw more than that amount.
Accounts subject to an RMD include: 401(k)s and 403(b)s, traditional IRAs, SEP IRAs, and SIMPLE IRAs. Roth IRAs are not subject to RMDs while the account owner is still alive.
How do I calculate my RMD?
Your RMD for each account is calculated every year based on the balance in that account at the end of that year, divided by the IRS’ life expectancy factor.
Any withdrawals you’ve taken throughout the course of the year will count towards your required amount, so you may find that you don’t need to withdraw anything additional at the end of the year.
If you don’t withdraw the full required amount by the due date, the excess amount may be subject to an additional tax of 25%, making it very important to stay on top of your accounts so you don’t lose out on any of your hard-earned funds.
If this seems a little daunting—don’t worry—a financial advisor can help you use the appropriate calculators to determine the distribution amount for each of your account(s).
Where can I get help with my retirement accounts?
To learn more about RMDs and how they impact you, check out our previous articles here and here.
For additional help with RMDs and with a full review of your financial picture, get in touch with a First Entertainment financial advisor today.
Michelle Lee, First Entertainment Credit Union Financial Advisor
323.845.4434
mlee@firstent.org