Required Minimum Distributions (RMD)

Required Minimum Distributions (RMDs) are mandatory withdrawals that retirees must take from their retirement accounts, such as traditional IRAs and 401(k)s, starting at age 73 (previously 72). The purpose of RMDs is to ensure that individuals withdraw funds from their tax-advantaged accounts during their lifetime, rather than leaving assets to grow tax-deferred indefinitely. The amount withdrawn each year depends on the account balance and the retiree's life expectancy. Failing to take the required distribution can lead to significant penalties, reinforcing the importance of planning for these withdrawals as part of retirement strategy.