Required Minimum Distributions (RMDs)

Required Minimum Distributions (RMDs) are the minimum amounts that retirement account holders must withdraw from certain retirement accounts, like IRAs and 401(k)s, starting at age 72. The goal is to ensure that individuals begin to use their retirement savings during their lifetime, rather than leaving them untouched indefinitely. The amount withdrawn is based on life expectancy and account balance. Failing to take the RMD can result in hefty tax penalties. Understanding RMDs is crucial for effective retirement planning and managing tax liabilities.