Mandatory minimum withdrawal rule that applies to many tax-deferred retirement accounts once the owner reaches the required age.
A required minimum distribution (RMD) is the minimum amount that must be withdrawn each year from many tax-deferred retirement accounts after the account owner reaches the applicable starting age.
The economic purpose is straightforward: retirement accounts can defer tax for a long time, but they are not meant to avoid tax forever.
An RMD matters because retirement tax planning changes once withdrawals are no longer fully optional.
At that point, account owners have to think about:
taxable income management
withdrawal timing
account sequencing
whether assets should stay in one retirement wrapper or be repositioned earlier
The annual withdrawal amount is generally based on the prior year-end account balance and an IRS life-expectancy factor.
That means the requirement is not just a fixed percentage. It is a rule-driven distribution formula that changes over time as age changes.
Different account types can have different treatment. The key practical lesson is that tax-deferred status and Roth status are not identical when it comes to later-life withdrawal rules.
Because the withdrawal is mandatory, failing to take it can trigger costly tax consequences.
IRA: One of the main account families where RMD rules become relevant.
Traditional IRA: A classic account type commonly associated with RMD planning.
401(k) Plan Plan"): Another major retirement wrapper that can be subject to withdrawal rules later in life.
Rollover IRA: An account that often inherits the same later-life withdrawal discipline as other tax-deferred IRAs.