Once you reach age 73 you're required to withdraw a certain amount of money from your retirement plans, such as IRAs, 401(k)s, and 403(b)s each year. That amount is called a required minimum distribution (RMD). Here are some answers to frequently asked questions to help you get started:
What's a required minimum distribution (RMD)?
Starting when you're age 73, a required minimum distribution (RMD) is a specific amount of money the IRS requires you to take from your tax-deferred retirement accounts each year.
What's the deadline for taking a required minimum distribution?
The deadline for taking your RMD is December 31 each year. For your first RMD, and only your first, you may delay taking a distribution until April 1 of the year after you turn 73.
For example, if you turned 73 in June of this year, you have two choices: you can take your first RMD by December 31 this year or you can delay taking your first RMD until April 1 next year (the year after you turn 73).
If you choose to delay, you'll have to take your first and second RMD in the same year, which may push you into a higher tax bracket.
Do I have to take my required minimum distribution if I am still working?
If you continue working past age 73, you have to take a required minimum distribution (RMD) from your IRA. However, you may delay taking RMDs from your current workplace savings plan, such as a 401(k), 403(b), or small-business account, if:
- You're still working
- You do NOT own more than 5% of the business you work for
- You have an employer-sponsored retirement account with the business you work for
Unless your plan requires you start required minimum distributions (RMDs) by age 73, you may delay taking an RMD from the account until April 1 of the year after you retire if you meet all the criteria above. Keep in mind that this does not apply to IRAs or other workplace plans you may have with companies you no longer work for.
How do I calculate my required minimum distribution (RMD) from an IRA?
In most situations, Fidelity can calculate the math for required minimum distributions (RMDs) every year for Fidelity retirement accounts.
Your RMD is generally determined by dividing your tax-deferred retirement account balance as of December 31 of the preceding year by a life expectancy factor. Your life expectancy factor corresponds with your age in the IRS Uniform Lifetime Table (PDF).
However, if your spouse is your sole beneficiary and is more than 10 years younger than you, you can use the IRS Joint Life and Last Survivor Expectancy Table (PDF).
You can view your calculated and estimated RMD amount by using our RMD Calculator.
What are my options for using my required minimum distribution (RMD)?
It is important to plan ahead, before you take your RMD. Here are three ideas to consider:
Invest it - If you don’t need your RMD for day-to-day living expenses, simply transfer your RMD amount from your retirement account to a taxable brokerage account and then re-invest according to a strategy that fits your needs. A shares-in-kind distribution may also be an option to consider. If you would like to help give someone’s education a head start, consider using the money you take for your RMD to fund a 529 college savings account. Remember, even though you may not need RMD monies to fund your retirement spending, you’re still required to take them out of your applicable retirement accounts.
Spend it - If you plan to use RMDs to pay for current living expenses, consider using a Fidelity cash management account to pay your expenses. It often makes sense to have a budget in retirement. Going through the budgeting process can help you estimate living expenses, manage your cash flow, and determine if you'll need to use your RMDs to fund your retirement lifestyle.
Gift it - Did you know you can help others all while lowering your own tax burden? Consider donating your RMD to an eligible charity with a qualified charitable distribution (QCD). A QCD is a direct transfer of funds from your IRA custodian, payable to a qualified charity. Once you've reached age 73, the QCD amount counts toward your RMD for the year, up to an annual maximum of $105,000 per individual, or $210,000 for a married couple filing jointly ($105,000 from each of their respective IRAs). It's not included in your gross income and does not count against the limits on deductions for charitable contributions. QCDs can have significant advantages for certain high-income earners, especially those that claim the standard deduction and would not benefit from itemizing charitable donations of cash proceeds from an RMD.
What types of retirement accounts have required minimum distributions (RMDs)?
After reaching age 73, required minimum distributions (RMDs) must be taken from these types of tax-deferred retirement accounts:
- Traditional, rollover, SIMPLE, and SEP IRAs
- Most 401(k) and 403(b) plans, including Roth 401(k)s1 (only for inheritors, not the original account owner)
- Most small-business accounts (self-employed 401(k), profit sharing plan, money purchase plan)
Do I have to take a required minimum distribution if I inherited an IRA?
When you inherit an IRA, many of the IRS rules for required minimum distributions still apply. However, there may be rules that change the calculation based on your relationship to the original owner. Learn more about the RMD rules for inherited IRAs that apply to you.
Can I withdraw my total required minimum distribution from one of my retirement accounts?
If you have multiple retirement accounts it's possible to take your required minimum distributon (RMD) from one, but it depends on the type of retirement account:
- For IRAs (Traditional, rollover, SIMPLE, and SEP): You must calculate the RMD for each of these accounts separately, but you can withdraw the total RMD amount from one or any combination of accounts.
- For 403(b)s: RMDs must be calculated separately for each account, but the total amount of the RMD can be withdrawn from any one or a combination of your 403(b) accounts.
- For 401(k)s: RMDs must be calculated separately for each account and taken individually from those accounts.
Any distribution from an account that requires an RMD will count toward that year's RMD. Amounts withdrawn in excess of that RMD amount do NOT reduce RMD amounts in future years.
You are not required to take RMDs from your own Roth IRA and cannot satisfy an RMD requirement with a withdrawal from a Roth IRA.
How do I take a required minimum distribution (RMD) from a Fidelity IRA?
You can view your calculated RMD amount, if any, in our Retirement Distribution Center, which offers a detailed snapshot of your RMD, then take your amount through our quick transfer process. We also offer an automatic schedule for taking your RMD each year.
Please note, for 401(K) and 403(b) plans, you need to engage with your plan's record keeper.
How are required minimum distributions (RMDs) taxed?
When taking a required minimum distribution (RMD), the money you take is taxed as ordinary income and, as a result, may be subject to both federal and state taxes. If you delayed your first RMD up to April 1 of the year following the year you turn 73, you’ll need to take two RMDs in one year, which could impact your marginal tax rate for that year. Whatever your situation, however, there are ways to lower your taxable income.
Building a thoughtful retirement income plan can help you use RMDs in the most effective way, and help you reach your important financial goals. At the very least, it's important to spend some time understanding RMDs and your options with a financial and tax professional.