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What Is a Required Minimum Distribution?

November 15, 2022

What Is a Required Minimum Distribution?

When you save up for retirement, you spend decades contributing to building a financially secure future. But when you turn 72, it’s time to start thinking about systematic withdrawals as well - namely, your Required Minimum IRA distribution. What is a Required Minimum Distribution? It is the amount of money that you must withdraw from the account annually to avoid facing financial penalties. Learn more about your Required Minimum IRA Distribution with IntentGen, and be sure to get in contact with us for all your financial planning needs.

Required Minimum IRA Distribution Basics

Your Required Minimum Distribution, or RMD, is specific to you and your retirement account. A 72-year-old investor with a large traditional IRA may have a different RMD than an 80-year-old investor with a smaller inherited account. Your RMD is determined by:

  • The fair market value of your Traditional, Rollover, Inherited, SEP, or SIMPLE IRA
  • Your age 
  • Your life expectancy

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If you do not take your RMD by the IRS deadline, the amount not withdrawn is taxed at 50% as a penalty. If you do not feel that you need the money for living expenses, you can talk with our team about your options for re-investment.

Required Minimum Distribution for an Inherited IRA

What if you’re dealing with an inherited IRA instead? When you receive a retirement plan upon a person or entity’s death, you can place these funds into an inherited IRA plan. While this categorization is slightly different than a standard personal retirement plan, you’ll still need to withdraw funds to avoid IRS penalties. The required minimum distribution for the inherited IRA will depend on several factors:

  • Beneficiary's age
  • Your relationship with the beneficiary
  • The value of the account

IRA Required Minimum Distribution Calculator

So, what is your RMD? You have several options to find your RMD for the year. One way is to use our IRA Required Minimum Distribution calculator to weigh all the different factors. Our free calculator uses just a few pieces of information to create an instant estimate at your convenience. 

But, you can also get a more in-depth look at your RMD with our financial consulting services in the area. This enables you to get your personalized Required Minimum Distribution, while also learning the best ways to successfully manage your money in retirement. Contact us at IntentGen to learn more!