Definition: The minimum amount that you must withdraw from your IRA or 401(k) beginning on April 1 of the year following the year in which you reach the age of 70 1/2. Withdrawals must then continue each and every year thereafter (but see the Note below). The required amount is calculated by taking the fair market value of the account as of December 31 of the prior year and dividing it by a factor determined by the IRS.
AARP offers a free calculator on its website.
Note that some companies allow participants in their 401(k) plans to put off taking required minimum distributions if the employee continues to work beyond age 70 1/2.
Note: On December 23, 2008, President Bush signed the Worker, Retiree and Employer Recovery Act of 2008 (or WRERA) into law. This act suspends RMDs for those required to take them for the 2009 tax year.
Also Known As: RMDs
