Required Minimum Distributions (RMDs) are the minimum amount of money that must be withdrawn from certain tax-advantaged retirement accounts once you reach a certain age, typically 72 years old for most retirement accounts. The purpose of RMDs is to ensure that individuals do not indefinitely defer paying taxes on their retirement savings.

To calculate your RMD, you can use the following formula: RMD = Account Balance / Distribution Period. The account balance is the total value of your retirement account as of December 31 of the previous year, and the distribution period is determined by your age and life expectancy using IRS tables. You can also use online calculators or consult with a financial advisor for assistance.

The deadline to take your RMD is typically December 31 of each year. However, for your first RMD, you have until April 1 of the year following the year you turn 72 to take your distribution. It’s important to take your RMD on time to avoid penalties from the IRS.

If you fail to take your RMD by the deadline, you may be subject to a 50% penalty on the amount you were required to withdraw. This penalty is in addition to the regular income tax you would owe on the distribution. It’s important to stay on top of your RMDs to avoid costly penalties.