The main benefit of using tax-deferred retirement accounts like 401(k)s and traditional IRAs is that they allow you to deduct contributions from your taxable income in the year you make them (traditional IRAs have qualifications that must be met). In return, the IRS expects to recoup some money on the back end by taxing withdrawals in retirement.
To make sure these withdrawals are made, the IRS enacts required minimum distributions (RMDs), which become required the year you turn 73. The amount of these RMDs is based on two factors: your age and the amount you have in your retirement account at the end of the previous year.
Image source: Getty Images.
Calculating your RMD
To find your exact RMD, first find your account balance at the end of the previous year. Next, look for the government-established life expectancy factor (LEF) that matches your age and marital status (most people will use the uniform lifetime table, except for people whose sole beneficiary is a spouse who is more than 10 years younger than them).
Once you have those two numbers, divide your account value by your LEF to get the exact RMD. For people using the uniform lifetime table, here are the RMDs for people ages 73 to 80 with $100,000 in a retirement account as of the end of 2024:
| Age | Life Expectancy Factor | Required Minimum Distribution |
|---|---|---|
| 73 | 26.5 | $3,774 |
| 74 | 25.5 | $3,922 |
| 75 | 24.6 | $4,065 |
| 76 | 23.7 | $4,219 |
| 77 | 22.9 | $4,367 |
| 78 | 22.0 | $4,545 |
| 79 | 21.1 | $4,739 |
| 80 | 20.2 | $4,950 |
Source: IRS Uniform Lifetime Table (RMDs rounded to nearest dollar).
Failing to take your RMD will result in a 25% penalty on the amount you were supposed to withdraw. If the mistake is corrected within two years, the penalty will be reduced to 10%.
