Required Minimum Distributions (RMDs) Explained
What an RMD is, when it starts, how it is calculated and how to plan for it before it forces extra taxable income.
Tax-deferred accounts like traditional IRAs and 401(k)s cannot grow forever. After a certain age the government makes you take money out and pay tax on it.
When it starts
Under current US law the RMD age is 73. Each year you divide the account balance at the end of the previous year by a life-expectancy factor from the IRS table. The factor falls as you age, so the percentage grows over time.
A simple example
A $500,000 balance with a factor of about 26.5 means a withdrawal near $18,900. That amount counts as taxable income, even if you do not need to spend it.
Why it matters
Large RMDs can push you into a higher bracket and affect other things such as Medicare premiums. Roth conversions in lower-income years are one way people reduce future RMDs.
Plan ahead
See your first withdrawals with the RMD calculator. Compare account types with the Roth vs traditional calculator and project your balance with the 401(k) calculator. Rules change, so confirm the current age and table with the IRS.
This article is general education, not financial advice.