Required Minimum Distributions (RMDs) are the minimum amounts that retirement account holders must withdraw from their retirement accounts each year once they reach a certain age, typically 72 for most retirement accounts. This is to ensure that the IRS collects taxes on these funds that have been contributed on a tax-deferred basis.

For most retirement accounts, including traditional IRAs and 401(k)s, you must start taking RMDs by April 1st following the year you turn 72. However, if you are still working and contributing to a 401(k) at that age, you may be able to delay RMDs until you retire.

RMDs are calculated based on your age, account balance, and life expectancy. The IRS provides Uniform Lifetime Tables to help calculate the amount you must withdraw each year. Failure to take the full RMD amount could result in a penalty of 50% of the amount not withdrawn.

Once you withdraw your RMD amount, you are free to reinvest that money in other accounts or assets. However, you cannot directly roll over your RMD amount into another retirement account like you can with a regular distribution.

There are a few exceptions to taking RMDs, such as the still-working exception mentioned earlier. Additionally, if you have a Roth IRA, you are not required to take RMDs during your lifetime. Inherited IRAs also have different rules for RMDs.