A required minimum distribution, or RMD, is the minimum amount the IRS requires you
to withdraw each year from most pre-tax retirement accounts once you reach RMD age.
RMDs exist because pre-tax retirement accounts grow without being taxed, and the IRS
requires withdrawals so it can eventually collect income tax on that money.
RMDs apply to accounts such as traditional IRAs, 401(k)s, and 403(b)s. Roth IRAs are
not subject to RMDs during the original owner's lifetime.
Your RMD amount is recalculated every year, based on your account balance as of
December 31 of the previous year and a life expectancy factor from the IRS Uniform
Lifetime Table. As your balance and life expectancy factor both change, your
required withdrawal changes with them.
You can take an RMD as a lump sum or in smaller withdrawals throughout the year, as
long as the total amount is withdrawn by December 31. Withdrawals count as ordinary
taxable income in the year they're taken, which can affect your tax bracket.