Each year we help our clients distribute their Required Minimum Distributions, or RMDs, from their retirement accounts. Also, each year, we get the question, “How is my RMD calculated?”
It’s a straightforward calculation, so let’s dive in:
First, you need to find the balance of your retirement account as of December 31st of the previous year. This includes all your traditional IRAs, 401(k)s, and other tax-deferred accounts.
Next, you’ll need to determine your distribution period using the IRS’s life expectancy tables. Most people will use the Uniform Lifetime Table, but if your spouse is more than 10 years younger and the sole beneficiary, you’ll use the Joint Life and Last Survivor Expectancy Table.
Now, let’s do the math. Divide your account balance by your distribution period. For example, if your account balance is $100,000 and your distribution period is 25.6 years, your RMD would be $3,906.25.
Remember, you must take your first RMD by April 1st of the year after you turn 73. After that, RMDs must be taken by December 31st each year.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/ SIPC.
This is a hypothetical situation based on real life examples. Names and circumstances have been changed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your advisor prior to investing.