Minimum Retirement Plan Distributions

Qualified retirement plans offer tax benefits if you follow a few IRS rules.

Retirement Plans are intended for Retirement

Penalties for early withdrawal help discourage early withdraws and guides investors to withdraw their qualified funds during their retirement years.


Required Withdrawals

The government also wants to ensure that they will one day be able to tax these funds which should create a much larger collectable tax.

If you have a 401(k), a Keogh, a SEP or a traditional IRA, you must begin taking regular distributions from your plan by April 1st of the year following the year you turn 70½.

Although the tax code allows you to wait until April 1 of the year following the year you turn 70½,it is generally a good idea to take your first mandatory withdrawal in the same year you turn 70½.

If you wait, you will have to make two withdrawals in the first year, doubling the amount of taxable income you must declare and potentially increasing your marginal tax bracket.

The amount you are required to withdraw (RMD or Required minimum Distribution) each year, and which will be subject to taxation, is based on tables which estimate your remaining lifetime.


Calculating Your Required Withdrawals

Its is a good idea to withdrawal from your qualified plans automatically–if you do not meet the required minimum distribution withdrawals, the IRS will impose a penalty of 50% of the amount not withdrawn, plus the income taxes due.

Based on your age, you divide your qualified plan balance as of the last day of the previous year by the number from the IRS Pub. 590 table shown below.

The resulting amount is your annual required minimum distribution.


Age IRS divisor RMD
Percentage of Qualified money required to be withdrawn
70 27.4 3.65%
71 26.5 3.77%
72 25.6 3.91%
73 24.7 4.05%
74 23.8 4.20%
75 22.9 4.37%
76 22 4.55%
77 21.2 4.72%
78 20.3 4.93%
79 19.5 5.13%
80 18.7 5.35%
81 17.9 5.59%
82 17.1 5.85%
83 16.3 6.13%
84 15.5 6.45%
85 14.8 6.76%
86 14.1 7.09%
87 13.4 7.46%
88 12.7 7.87%
89 12 8.33%
90 11.4 8.77%
91 10.8 9.26%
92 10.2 9.80%
93 9.6 10.42%
94 9.1 10.99%


American Retirement Advisors provides general information only and it is not to be construed as tax, legal, or investment advice. Although the information is believed to be reliable, please note that individual situations can vary. Always seek professional advice before making any tax, legal, or investment decisions.