What is the Required Minimum Distribution (RMD) Rule for Tax-Deferred Retirement Plans Like IRAs and 401(k)s?

“RMD” is an abbreviation for “required minimum distribution.” This is the amount of money that retirees age 70½ and older are required to withdraw from their tax-deferred plans such as IRAs and 401(k) and 403(b) plans. RMD rules are serious business. The penalty for not withdrawing the proper amount is a 50% excise tax on the amount not distributed as required.

For example, if you don’t withdraw a required $1,000 from your traditional IRA or tax-deferred employer plan, the tax …