Required minimum distributions (RMDs) are a way for the IRS to ensure it receives some money after allowing you to deduct contributions to tax-deferred accounts like a 401(k) from your taxable income. It wants to avoid situations where a person gets the upfront tax break and then doesn't make withdrawals and avoids taxes altogether.
The two main factors in determining your RMDs are your age and your account value at the end of the previous year.
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How to calculate your RMD
Below are the three steps needed to calculate your RMD:
- Find your account balance at the end of the previous year.
- Look for the life expectancy factor (LEF) corresponding to your age and marital status. Most people will use the Uniform Lifetime table, except those whose sole beneficiary is their spouse who is more than 10 years younger than them. In that case, you'll use the Joint Life and Last Survivor Expectancy table.
- Divide your account value by your LEF.
As an example, let's assume you're using the uniform lifetime table and had $250,000 in a retirement account at the end of 2024:
| Age | Distribution Period | RMD on $250,000 |
|---|---|---|
| 73 | 26.5 | $9,434 |
| 74 | 25.5 | $9,804 |
| 75 | 24.6 | $10,163 |
| 76 | 23.7 | $10,548 |
| 77 | 22.9 | $10,918 |
| 78 | 22.0 | $11,364 |
| 79 | 21.1 | $11,848 |
| 80 | 20.2 | $12,376 |
Source: IRS. RMDs rounded to the nearest dollar. Table by author.
If you don't take your RMD, you'll be subject to a 25% penalty on the amount you failed to withdraw. The penalty can be reduced to 10% if you correct the mistake within two years.
