What are Required Minimum Distributions (RMDs)?

RMDs are mandatory annual withdrawals the IRS requires you to take from Traditional IRAs, 401(k)s, and most other pre-tax retirement accounts starting at age 73 (under the SECURE 2.0 Act). The amount is calculated by dividing your account balance at the end of the prior year by a life-expectancy factor from the IRS Uniform Lifetime Table. Failure to take your RMD results in a 25% excise tax on the amount you should have withdrawn. Roth IRAs are not subject to RMDs during the original owner's lifetime. If you have large pre-tax balances, Roth conversions before age 73 can reduce future RMDs significantly — explore this at wealthserene.com/tools/rmd-calculator.