Required Minimum Distributions

Required minimum distributions (RMDs) are an important part of individual requirement accounts and defined-contribution retirement plans including 401(k), 403(b) and 457(b) plans. Such plans are intended to provide retirement income for the account owner and his or her spouse. They are not intended to pass untaxed wealth on to the next generation. RMDs do that by requiring that a portion of the balance in an account is distributed (and taxed) each year beginning by age 70½ (recently extended to age 72). This article examines the origins and extensions of RMDs, how they are calculated and how they work. It then assesses the recently enacted SECURE Act and the proposed updated Internal Revenue Service tables of the life-expectancy factors used to calculate the amount of the annual RMDs.