I would love to have a personal chat with you. Call me.
88
12.7
89
12.0
90
11.4
What is an IRA?
An individual retirement account, more commonly referred to as an IRA, is a good place to save for your retirement. Once you reach a certain age, though, you’ll have to start taking a minimum amount out of your account each year, called a required minimum distribution (RMD). The RMD table the IRS provides can help you figure out how much you should be withdrawing. This guide will take you through how to use the RMD table.
What Is a Required Minimum Distribution (RMD)?
An RMD is the minimum amount of money you must withdraw from a tax-deferred retirement plan and pay ordinary income taxes on after you reach age 72 (or 70.5 if you were born before July 1, 1949). Once you reach this milestone, you generally must take an RMD each year by December 31.
The amount you must withdraw depends on the balance in your account and your life expectancy as defined by the IRS. If you have more than one retirement account, you can take a distribution from each account or you can total your RMD amounts and take the distribution from one or more of the accounts.
IRA Required Minimum Distribution (RMD) Table for 2021
You must take out your first required minimum distribution by April 1 of the year after you turn 72. (or 70.5 if you were born before July 1, 1949) all subsequent years, you must take the money out of your accounts by Dec. 31.
Here is the RMD table for 2021, based on information from the IRS:
IRA Required Minimum Distributions Age
RMDs apply to the following retirement plans:
-
Traditional IRAs
-
Most 401(k) and 403(b) plans
-
Most small business accounts
However, RMDs don’t apply to Roth IRAs, because contributions to these accounts are with after-tax dollars. That said, RMDs do apply to inherited RMDs.
Why Do RMDs Exist?
You may find yourself wondering why there is a required minimum distribution for your IRA. After all, it’s your money, so why can’t you take it out of your account at your own pace? The answer to this question is the same as the answer to many questions when it comes to financial matters:Taxes.
You don’t pay taxes on the money in your IRA when you put it in. Instead, you pay taxes when you withdraw the funds in retirement. The money will be taxed according to your current tax bracket. This is beneficial if you are in a lower tax bracket in retirement than you were when you first earned the money and were probably earning a much higher total income.
If you were to leave all of your money in your IRA, it would eventually become eligible to be passed on as inheritance and perhaps end up un-taxed. The required minimum distribution forces you to take out some money while it can still be taxed.