Required Minimum Distributions (RMDs)

When  taxpayers reach age 70 1/2, they are required to withdraw an RMD from their retirement plans except for Roth IRAs. The RMD is calculated by dividing the account balance at the end of the prior calendar year by the distribution period on the uniform lifetime table for the owner's age. For example, the distribution period for age 70 is 27.4. If the balance in the retirement account is $100,000, then the RMD is $3,650 ($100,000/27.4). Usually the broker will remind the taxpayer of the RMD amount and ask when you want to withdraw the amount. There is a 50% penalty on an RMD that is not timely withdrawn. The government is trying to encourage you to spend the money on your own retirement and not leave it to your children.