Required Minimum Distribution (RMD)

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Definition - What does Required Minimum Distribution (RMD) mean?

Required Minimum Distribution (RMD) is the minimum withdrawal for certain retirement plans, as prescribed by the Internal Revenue Service. This usually begins on the first April after the worker has reached 70.5 years of age and retires from their job.

Insuranceopedia explains Required Minimum Distribution (RMD)

Required Minimum Distribution affects those who do not withdraw from their retirement accounts during the specified date. Failure to withdraw might mean a high tax penalty. The minimum withdrawal is based on the account value and the owner's life expectancy based on IRS calculations. When the plan owner dies, the RMD rules become different for the beneficiary.

Some of the plans that are under this withdrawal rule are SEP, IRA, and Simple IRA.


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