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What You Need to Know about Required Minimum Distributions

So what’s an RMD? And how do you know whether you need to take one? Here’s a brief question-and-answer to help you sort it all out.

What is a Required Minimum Distribution?

Our tax laws generally require people with certain retirement accounts to start making withdrawals from those accounts, beginning with the year in which they turn age 70-1/2 and every year thereafter. The amount you’re required to withdraw is referred to as your required minimum distribution, or RMD for short. For the IRAs offered by Millbury Savings Bank, those saving in Traditional IRAs must generally take RMDs, while those saving in Roth IRAs generally do not.

How do I know how much my RMD is?

The amount you’re required to withdraw depends on a couple of factors, including your life expectancy and the total balance of all of your retirement accounts at year’s end. Most people can calculate their RMD by looking up their age on the IRS’s Uniform Lifetime Table (page 104 in IRS Publication 590 found at and finding their “life expectancy factor.” Simply take that life expectancy factor and divide it into the total balance of your retirement accounts. The resulting amount is the amount you must take as an RMD. For example, let’s say Mary is 75 years old and has $100,000 in total retirement savings. Her life expectancy factor is 22.9 on the IRS Uniform Lifetime Table. Mary takes $100,000 and divides it by 22.9, to realize she must take $4,366.81 from her retirement accounts as an RMD.

What happens if you forget to take an RMD?

Generally, anyone who fails to take their RMD is subject to a 50% excise tax penalty on the amount that should have been received. So, in Mary’s case, she would pay a penalty of $2,183.41! If you have additional questions about RMDs, or about any aspect of your IRA, contact one of our customer service representatives today.

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