RMD Calculations
Required Minimum Distributions (RMDs) are mandatory withdrawals from retirement accounts starting at age 73. Knowing how RMDs are calculated helps avoid IRS penalties (up to 50%). Our guide explains the RMD calculation formula, IRS life expectancy tables, and retirement account rules. Use our RMD calculator, learn tax strategies, and optimize your retirement planning.
RMD Calculator
RMD Calculation Formula
RMD = Account Balance ÷ IRS Life Expectancy Factor
Step-by-Step Calculation Process
- Determine your age on December 31 of the calculation year
- Find your current account balance
- Locate your life expectancy factor from IRS Publication 590-B
- Divide balance by life expectancy factor
IRS Life Expectancy Table (Partial)
| Age | Life Expectancy Factor |
|---|---|
| 72 | 27.4 |
| 75 | 24.6 |
| 80 | 20.2 |
| 85 | 16.0 |
Advantages & Disadvantages of RMDs
Advantages:
- Prevents indefinite tax deferral
- Standardizes retirement withdrawals
- Helps prevent outliving retirement savings
Disadvantages:
- Forced taxable withdrawals
- Complex calculation rules
- Penalties for miscalculations
FAQs: How Are RMDs Calculated?
1. What happens if I miss an RMD?
The IRS charges 50% penalty on missed RMD amounts plus ordinary income tax. File Form 5329 to report and request penalty waiver if qualified.
2. Are RMDs required for Roth IRAs?
Roth IRAs don't require RMDs during owner's lifetime. Roth 401(k)s require RMDs but can be avoided by rolling into Roth IRA.