Required Minimum Distributions (RMDs) are the minimum amount of money that must be withdrawn from a retirement account each year once the account holder reaches a certain age, typically 72 for most retirement accounts.

RMDs are important in retirement planning because they help ensure that retirees are using their retirement savings as intended – to provide income during retirement. Failing to take RMDs can result in significant penalties and taxes.

RMDs are calculated based on the account holder’s age, life expectancy, and the balance of their retirement accounts. The IRS provides tables to help account holders determine their RMD amounts each year.

If you fail to take your RMDs, you may be subject to a 50% penalty on the amount you were supposed to withdraw. Additionally, you will still be required to withdraw the RMD amount and pay taxes on the distribution.

To plan for RMDs in retirement, it’s important to understand the rules and requirements for RMDs, calculate your RMD amounts each year, and consider strategies to minimize the tax impact of RMDs on your retirement income.