• RMDs are required minimum distributions that affect certain retirement accounts. For certain accounts, you are required to start withdrawing a minimum amount of money from your account each year based on your age, your beneficiary or beneficiaries and the value of all of your accounts subject to RMDs. The RMD is the minimum you can withdraw; if you choose, you can withdraw more.
  
  

What Acccounts Require RMDs?

• RMDs affect employer sponsored pans, like traditional and Roth 401k and 403b plans and traditional IRAs. Roth IRAs are exempt from the RMD requirements. RMDs start in the year that you turn 70 1/2 years old and continue each year thereafter. If you are still working at age 70 1/2, certain qualified plans may allow to to further delay RMDs. You plan administrator will tell you if this is an option for you. You have until Dec. 31 each year to withdraw the money.
  
  

How Are RMDs Calculated?

• RMDs are calculated using one of the three life expectancy table created by the IRS: the single life expectancy table, the joint and last survivor expectancy and the uniform lifetime. These tables can be found at the end of IRS Publication 590. The first table is only used if you received a retirement account as a beneficiary. The second is only used if your spouse is at least 10 years younger than you and is the only beneficiary of the account. If neither of these conditions applies to you, you should use the third table.
  To calculate your RMD, first determine the number of years the IRS expects your accounts to be disbursed over. Then divide the total value of all accounts subject to RMDs by that amount. For example, if you were 79 and were using table three, you would use 19.5 years. If your total value of the accounts was $195,000, you would have to withdraw $10,000 that year.
  
  

What are the Penalties for not Taking an RMD?

• If you fail to withdraw the appropriate amount, you have to pay a 50 percent penalty on any amount that was not distributed. For example, if you were required to take out $10,000 but you only took out $4,000, you would have to pay a $3,000 penalty because $3,000 is 50 percent of the $6,000 you did not withdraw.