A required minimum distribution (RMD) is an annual withdrawal you must take from certain retirement accounts when you reach a specific age. The purpose behind these required distributions is to ensure that tax-advantaged retirement accounts are not used indefinitely, allowing the IRS to collect taxes on the accumulated funds.
Not taking RMDs on time or for the correct amounts may result in penalties, so it’s important to understand how they work and when they’re required.
What is my RMD age?
Your RMD age is one factor used to determine when you must start taking RMDs. Due to changes in the law over time, your RMD age is based on the year you were born.
If you were born before July 1, 1949, your RMD age is 70 ½.
If you were born July 1, 1949 - December 31, 1950, your RMD age is 72.
If you were born January 1, 1951 - December 31, 1958, your RMD age is 73.
If you were born after December 31, 1958, your RMD age is 75.
What is a required beginning date (RBD)?
The RBD is the deadline to take your first RMD. This date is dependent on the following:
Your age
Whether you are still working for the employer sponsoring the plan
Whether you own any part of the business sponsoring the plan
If you own more than 5% of the business, your RBD is April 1 of the year following the year in which you reach your RMD age.
If you do not own more than 5% of the business, your RBD is April 1 of the year following the year in which you (1) reach your RMD age or (2) stop working for the business sponsoring the plan, whichever is later.
Please note that the delay until you are no longer working for the plan sponsor stated above is dependent on elections made in your plan’s document. While all of Guideline’s plans include this delay, rules may be different if you have an account with another employer.
While your first RMD may not be due until April 1 of the following year, if you request a distribution or rollover during the year you reach your RMD age (or leave employment), you will have to take your RMD before the distribution or rollover can take place.
If you took RMDs in a prior year, you must continue to take them even if your ownership changes.
Examples:
Rory owns 25% of Last Centurion Enterprises. He is still working there when he turns 73 on July 14, 2025. Because he owns more than 5% of the business, his RBD is April 1, 2026, even though he is still employed. However, if Rory decides to rollover his account balance to his IRA on November 1, 2025, he would need to take his RMD before he could complete the rollover.
Amy owns 3% of Last Centurion Enterprises. She is still working there when she turns 73 on April 2, 2025. Because she is still working and does not own more than 5% of the business, her RBD will not be until she actually leaves employment with the company.
River used to work at Last Centurion Enterprises but left employment in 2018. She turns 73 on August 28, 2025. Because she is no longer working for the company, her RBD will be April 1, 2026.
You can use the following decision tree to help you determine if you need to take an RMD.
What is the due date to take RMDs after my first year?
RMDs must be taken annually, no later than December 31 for all years after you pass your RBD. This includes the year following the year in which your first RMD is due, regardless of whether you delay taking it until April 1 of the following year.
For example, if you turn 73 in 2024 but delay taking your 2024 RMD until April 1, 2025, you must still take your 2025 RMD no later than December 31, 2025.
How is my RMD amount calculated?
Your RMD amount is calculated by dividing your non-Roth account balance as of December 31 of the previous year by your life expectancy factor.
Generally, your life expectancy factor is taken from the IRS uniform life expectancy tables. Unless your spouse is (1) your sole beneficiary under the plan and (2) they are more than 10 years younger than you, then the factor is taken from the IRS joint life expectancy tables.
Will I owe taxes on my RMDs?
Yes, any amount of your RMD that is pre-tax will be taxable to you as ordinary income and subject to federal and state withholding requirements.
What happens if I do not take my RMD?
Failure to request an RMD may result in a penalty with an excise tax on the difference between the actual amount distributed and the RMD for the relevant tax year.*
You may be eligible for a waiver of the penalty for not taking your full RMD. You can find more information about that waiver here.
How can I begin my RMD request?
If you are eligible for an RMD with Guideline, you will receive a notification within your dashboard in January (or when you first become eligible, if later). The task will share instructions for submitting your RMD request form. You may also find the RMD Distribution Form within the Forms & Templates folder of your Resource Library at any time.
How long until I receive my check?
After you submit the RMD request form, standard processing and shipping takes approximately 3-4 weeks. If you upload an RMD form outside of the RMD dashboard task, please contact us to request processing.
* This information is for general education purposes only and not intended to be tax advice. We encourage you to consult with a qualified tax professional before requesting a distribution.