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An Overview of Retirement Plan RMDs

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Retirement account owners who can finance their retirement years without using their retirement assets may prefer to enjoy the tax-deferred growth offered to retirement plan assets forever. This, however, is not possible, as the Internal Revenue Service (IRS) eventually wants the deferred taxes on these balances.

If you own a traditional IRA, SEP IRA, SIMPLE IRA, qualified plan account, 403(b) account, and/or governmental 457(b) account and you are age 72 or older by the end of the year, you must withdraw a minimum amount from your balance annually, and this amount is referred to as a required minimum distribution (RMD). (Prior to the year 2020, the RMD trigger age was 70½.)

Key Takeaways

  • Traditional IRAs and 401(k) retirement accounts mandate that once you reach a certain age, you must begin taking minimum withdrawals.
  • These required minimum distributions, or RMDs, begin at age 72, and the amount is based on your retirement account’s value and your life expectancy.
  • The $2 trillion coronavirus emergency stimulus package has suspended required minimum distributions from retirement accounts in 2020.
  • If you fail to take your RMDs or miss the deadline to do so in years when RMDs are required, you will be fined up to 50% of the amount you were to have withdrawn.

The Required Beginning Date

Recognizing that the retirement account owner may need some time to adjust to taking RMDs, the IRS provides a reprieve to individuals in their first year. If you reach age 72 in 2021, for example, you have until April 1, 2022, to distribute the 2021 RMD amount from your retirement account, rather than Dec. 31, 2021.

April 1 of the year following the one in which you attain age 72 is referred to as the required beginning date (RBD). If your balance is in a qualified, 403(b), or 457(b) plan, your employer may allow you to defer the start of your RMD until after you retire, even if that occurs after age 72. Check with your employer or plan administrator regarding the rules that apply to the plan.

Calculating Your RMD

Your previous year-end fair market value is divided by your distribution period to arrive at your RMD amount for the year. For your IRAs, your custodian is required to calculate and notify you of the amount, either proactively or upon your request, provided they had your IRA as of Dec. 31 of the previous year. For qualified plans, your plan administrator should provide the calculation and facilitate the distribution.

Have your financial professional double-check the previous year-end fair market value for your IRA, as there are circumstances under which it may need to be recomputed.

Determining Your Distribution Period

The IRS provides three life expectancy tables: Table I (Single Life Expectancy), Table II (Joint and Last Survivor Expectancy), and Table III (Uniform Lifetime). Table I is used only by beneficiaries, and Table ll is used by a retirement account owner who has designated a spouse who is more than 10 years his or her junior as the sole primary beneficiary of the account. In all other cases, including those in which there is either no designated beneficiary or a non-person beneficiary, such as a charity, Table lll is used to determine the distribution period.

To determine your applicable distribution period, use your age and your beneficiary’s age, if applicable, for the year the calculation is being done. For example, if you were born in 1949, your age for 2020 is 71. Unless the sole beneficiary of your IRA is your spouse and he or she is more than 10 years your junior, your distribution period is 26.5. This is determined as follows: locate your age on Table lll. The corresponding figure to the right of it is your distribution period.

Alternatively, assume that your sole primary beneficiary is your 50-year-old spouse. Your distribution period is then determined as follows: locate your spouse’s age on the top horizontal bar of Table ll (Appendix C), then locate your age on the first vertical bar. Your distribution period is where the two ages meet at right angles within the chart. In this example it is 35.0.

What Happens if You Miss Your RMD Deadline

If the RMD amount is not distributed by the deadline, then the IRS assesses a 50% excise tax on the amount not withdrawn. This is referred to as an excess-accumulation penalty. If you withdraw only a portion of the RMD amount, the penalty is assessed on the balance. For example, say your calculated RMD amount for the year is $10,000, and you withdrew $5,000. You will be assessed a 50% excise tax on $5,000. Note that no penalties will be exacted in 2020 for not filing RMDs, because they have been suspended by the CARES Act due to the coronavirus outbreak.

All Is Not Lost—Maybe

Should you find yourself in the unfortunate predicament of having to pay this excise tax due to an error, you may request a waiver from the IRS. Generally, to consider the waiver, the IRS requires that you submit a letter of explanation asking for a waiver with your income tax return. The excise tax is reported on IRS Form 5329, which may be obtained from the IRS online. You may need the assistance of a retirement plan consultant or tax professional with requesting the waiver.

Multiple Retirement Accounts


The IRS permits individuals with multiple IRAs to total the RMDs for all the IRAs and distribute that total from any one of them. As a word of caution, these amounts should be calculated separately for each IRA, as different rules could apply to each. For example, if you have two IRAs, one with your spouse who is more than 10 years your junior as the sole primary beneficiary and the other with your daughter as the primary beneficiary, different tables would be used to calculate the RMD for each IRA.

Qualified Plans

If you own assets under multiple qualified plans, RMD amounts for each plan must be distributed from each plan. Unlike distributions from multiple IRAs, these amounts cannot be combined.


Similar to RMDs from IRAs, RMDs for multiple 403(b) accounts must be calculated separately but may be combined and withdrawn from one 403(b) account.

Roth IRAs

For Roth IRAs, the RMD rules do not apply to the Roth IRA owner. A different set of RMD rules applies to Roth and traditional IRA beneficiaries.

The Bottom Line

To ensure that your RMD amounts are calculated properly and you adhere to the general rules, be sure to consult with a competent retirement or tax professional or your financial institution. Taking precautionary steps will help to ensure that you avoid any associated penalties. Also try to avoid waiting until the last minute to request your RMD, as doing so could result in you missing the deadline by which the amount must be withdrawn in order to avoid penalties.

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