Required Minimum Distribution (RMD)
Mandatory annual withdrawals from tax-deferred accounts starting at 73.
What is Required Minimum Distribution (RMD)?
The IRS eventually collects on deferred accounts. Beginning at age 73 (SECURE 2.0), a minimum amount based on account balance and life expectancy must be withdrawn each year. Missing one triggers a penalty of 25%, reduced to 10% if corrected promptly. Roth IRAs are exempt for the original owner.
Required Minimum Distribution (RMD): a worked example
A $1,000,000 IRA at 73 requires roughly $37,700 withdrawn that year.
More terms in Taxes & Account Types
Capital Gain (Short-Term vs. Long-Term)
Profit on a sale, taxed by how long you held it.
Cost Basis
What you paid, used to compute gain or loss on sale.
Wash Sale Rule
A loss is disallowed if you rebuy the same security within 30 days.
Tax-Loss Harvesting
Realizing losses to offset gains and up to $3,000 of ordinary income.
Qualified Dividend
A dividend taxed at long-term capital gains rates.
Traditional IRA / 401(k)
Deduct now, grow tax-deferred, pay ordinary income tax on withdrawal.
Roth IRA / Roth 401(k)
Pay tax now, grow tax-free, qualified withdrawals are untaxed.
Step-Up in Basis
Inherited assets reset to market value at the date of death.