Learn about required minimum distribution (RMD) rules, deadlines, and potential tax penalties. Plus, how Vanguard can help you manage your RMD with ease.
RMDs: What you need to know
What is an RMD?
Required minimum distributions (RMDs) are annual withdrawals you have to take from your retirement accounts once you reach RMD age. These rules apply to most retirement plans, including employer-sponsored plans like 401(k), 403(b), and 457(b) accounts, as well as traditional IRAs, profit-sharing plans, and other defined contribution plans.
Since these accounts allow your retirement savings to grow tax-deferred, the IRS requires you to make withdrawals in retirement, so you can't put off paying taxes indefinitely. While there are some exceptions to RMDs—like Roth accounts—failing to take your full RMD by the annual deadline could result in a 25% penalty on the amount you were supposed to withdraw (or 10% if the RMD is corrected within 2 years).
Working with an investment professional can help you navigate your financial needs and alleviate your concerns.
Answers to common RMD questions
Taking Your RMD at Vanguard Transcript
If you'll soon need to take an RMD from your IRA or small-business retirement account, and you have questions, you've come to the right place.
I'll be specifically talking about traditional IRAs and small-business retirement accounts, such as SEP-IRAs, SIMPLE IRAs, and i401(k) accounts.
If you need information about an employer retirement plan, use the link to RMD rules for employer retirement plans, which you can find under Related Items.
Roth IRAs are exempt from RMDs. For more information about inherited IRAs, select the link to RMD rules for inherited IRAs in the Related Items section.
So, just when are you required to take your RMD?
In most cases, you'll need to take your first RMD by April 1, of the year following the year you reach age 73.
Once you have your first RMD under your belt, the annual deadline will be the last day of each calendar year.
But remember, if you miss these deadlines, you may have to pay a tax penalty.
If you'd just as soon not have to deal with the logistics of taking an RMD every year, our free RMD Service might be exactly what you're looking for.
Once you've signed up for the service, Vanguard will distribute your RMD on time, year after year, according to the instructions you provide when you enroll.
You can read more about the service and enroll, using the Sign up for RMD Service link.
If you'd still prefer to control the timing of your withdrawals or you want to choose which investments to sell each year, it's easy to take the distributions yourself.
Simply log on to your account using the link below and initiate a distribution.
Finally, if you'd like to learn more about RMDs, including options to donate the money through a qualified charitable distribution, or reinvest it in a nonretirement account, use the Get started (PDF) link to review our RMD Decision Tree.
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Important information
All investing is subject to risk, including the possible loss of the money you invest.
You may wish to consult a tax advisor about your situation.
When do you have to take your RMD?
If you have a retirement account that's subject to RMDs, you typically have to take RMDs starting at age 73.1 However, you have the option to delay taking your first RMD until April 1 of the year following the year you turn 73.
Once you reach age 74, you'll have to take your annual RMD by the December 31 RMD deadline each year. If you choose to delay your first RMD, you'll have to take 2 distributions that year: one for age 73 (by the April 1 deadline) and another for age 74 (by the December 31 deadline). In addition, both distributions will be taxable in the same year, which could bump you into a higher tax bracket.
Note: The RMD age will increase to 75 in 2033. That means if you were born in 1960 or later, your RMD age is 75.
Required Minimum Distribution Ages |
|
|---|---|
| Before July 1, 1949 | 70½ |
| July 1, 1949, through December 31, 1950 | 72 |
| January 1, 1951, through December 31, 1958 | 73 |
| January 1, 1959, through December 31, 1959 | See notes |
| On or after January 1, 1960 | 75 |
Source: CRS.
Notes: The first RMD is due by April 1 of the calendar year following the year in which an individual reaches the applicable RMD age. The second RMD is due by December 31 following the April 1 date. Final IRS regulations (89 Federal Register 58886) reserved a paragraph for proposed IRS Regulations (89 Federal Register 58644) to clarify that those born in 1959 must begin taking RMDs after reaching age 73.
Exceptions to RMDs
While you typically have to begin taking RMDs as soon as you reach RMD age, there are 2 main exceptions to this rule:
- If you're the original owner of a Roth IRA or designated Roth account (e.g., Roth contributions within a 401(k) plan), RMDs don't apply.
- If you're still working, you may be able to delay taking RMDs from your current employer-sponsored plan until after you retire (as long as you don't own 5% or more of the business sponsoring the plan).
How do I calculate my RMD?
The easiest way to calculate your RMD is by using an online RMD calculator. You can also calculate your annual RMD amount by dividing your plan's account balance on December 31 of the most recent year by your life expectancy factor based on IRS tables.
If you have an inherited IRA, RMD rules might look a little different. With these accounts—even if they're Roth accounts—you'll be subject to RMD rules for inherited IRAs. These rules vary based on the beneficiary's relationship to the original owner and whether RMDs have already started, though the RMD deadlines remain the same.
Use Vanguard's Inherited RMD Calculator to get your estimate.
Have an inherited IRA?
Make it automatic
Vanguard offers a free RMD Service. Tell us when to process the withdrawal and where to take the money from and we'll handle your RMD each year automatically!
Read the RMD Service Agreement for additional information (PDF)
Looking for personalized guidance on RMDs and other withdrawal strategies?
FAQs
RMD requirements refer to the minimum amount the IRS requires you to withdraw from your retirement accounts each year once you reach a certain age. RMD requirements apply to most retirement accounts, including 401(k) and 403(b) plans, traditional IRAs, and SEP-IRAs. Roth IRAs are exempt from RMDs if you're the original owner, though beneficiaries who inherit them are subject to RMD rules.
RMDs are generally taxed as ordinary income. The amount of tax you owe on your annual RMD varies based on the withdrawal amount and your current tax bracket.
If you're still working, you can delay taking RMDs from your current employer-sponsored retirement plan until you retire—as long as you don't own 5% or more of the business sponsoring the plan. Note that this exception doesn't apply to IRAs or employer-sponsored plans from previous jobs.