Required Minimum Distributions | RMD Calculator

Shawn Plummer

CEO, The Annuity Expert

A required minimum distribution, or RMD, is a mandatory withdrawal you must take from your retirement account each year. This amount is based on your age and the balance of your account. If you fail to withdraw the required amount, you may face penalties from the IRS. This guide will discuss how RMDs work and what you need to do to comply with the law.

What is a Required Minimum Distribution (RMD)?

A required minimum distribution (RMD) is an IRS rule that requires an owner of a qualified retirement plan to begin taking annual distributions starting at age 72 from their IRA or retirement plan. Qualified retirement plans include:

How Does Required Minimum Distribution (RMD) Work?

RMDs were created by the Internal Revenue Service (IRS) to prevent taxpayers from using their retirement accounts as tax shelters. Instead, the IRS ensures taxpayers pay taxes on their retirement savings over time by requiring withdrawals.

The amount of your RMD is calculated using a formula that considers your age and your retirement account balance. The IRS provides tables that can be used to calculate your RMD.

You must take RMDs from your retirement account no later than April following the year you turn 72. So, for example, if you turned 72 in 2021, you would need to take your first RMD by April 2022.

You will need to take your RMD each year after that. The deadline for taking your RMD is December 31st of each year.

Retirement Plans Without Required Minimum Distribution Requirements

Calculating RMDs Annually

You do not have a Required Minimum Distribution calculator. Minimum distributions are calculated by dividing the qualified retirement account balance on December 31 by the life expectancy factor (Distribution Period) below.

Total Account Balance ÷ Life Expectancy Factor = RMD Amount

Example: $100,000.00 (Account Balance) ÷ 23.8 (Age 74) = 4,201.68 (RMD Amount)

Multiple Qualified Retirement Plans

If you have more than one retirement account, you must take an RMD from each account. You can take your RMDs from one or more accounts, but the total amount you withdraw must be at least the amount of your RMD.

For example, if your RMD is $1000 and you have two retirement accounts with balances of $50,000 and $100,000, you could take an RMD of $500 from each account. Or, you could take an RMD of $1000 from one account and withdraw nothing from the other.

You cannot use your RMDs to meet the minimum distribution requirements for other accounts, such as IRAs or 401(k)s.

RMD Deadline

  • April 1st of the following year for retirees just turning age 72
  • December 31 for all subsequent years

Required Minimum Distributions – RMD Calculator

Use our free online RMD calculator to estimate withdrawals from your qualified retirement savings accounts.

Qualified Distributions For Life

Instead of withdrawing 401(k) and IRA distributions like a savings account, utilize an annuity with a guaranteed lifetime withdrawal benefit to automate RMDs.

Annuities are RMD-friendly, and withdrawals are guaranteed for the rest of your life with zero decreases in your income.

Note: You can purchase an annuity (with no tax penalties) with your 401(k), IRAs, retirement accounts, investments, and cash.

RMD Calculation Table (2022)

AgeDistribution Period
7227.4
7326.5
7425.5
7524.6
7623.7
7722.9
7822.0
7921.1
8020.2
8119.4
8218.5
8317.7
8416.8
8516.0
8615.2
8714.4
8813.7
8912.9
9012.2
9111.5
9210.8
9310.1
949.5
958.9
968.4
977.8
987.3
996.8
1006.4
Life Expectancy Table

How Are RMDs Taxed?

Required minimum distributions are taxed as ordinary income unless the funds withdrawn were previously taxed. This means RMDs are subject to Federal Income Tax and State and Local tax. Since Roth IRAs do not require required minimum distributions, there is no taxation.

Reducing Taxes

In some cases, an RMD could put a retiree in a higher tax bracket and affect Social Security and Medicare taxes. However, leveraging a qualified charitable distribution (QCD) could reduce these effects since QCDs can be excluded from taxable income.

What is a Qualified Charitable Distribution (QCD)?

A qualified charitable donation is a transfer from an IRA to a qualified charity. A QCD can be counted toward satisfying an RMD for the year. QCDs can be funded by:

  • Traditional IRA
  • Inherited Traditional IRA
  • Inherited Roth IRA
  • Inactive SEP IRA
  • SIMPLE IRA
Qualified Charitable Distribution (QCD) Rules
  • Age 72 or older as of the date of the distribution
  • $100,000 maximum amount per spouse ($200,000 total)
  • Only public charities are eligible
  • Donor-advised funds, private foundations, and supporting organizations are not eligible.
  • The donor can not receive a benefit in return—no Charitable Gift Annuities.

New RMD Rules

The SECURE Act changed rules regarding required minimum distributions starting in 2020, which are:

Inheriting an RMD

A beneficiary who inherits a qualified retirement account must distribute those assets within ten years of the deceased’s death, with no required RMD during those ten years. Those beneficiaries excluded from the 10-year rule are:

  • Surviving Spouse
  • Minor Children (until adulthood)
  • Disabled or chronically ill beneficiaries
  • Beneficiaries are less than ten years younger than the deceased.

These exceptions are allowed to stretch RMD payments over their life expectancy.

How To Offset Required Minimum Distributions With Annuities

Most annuities are “RMD-Friendly.” If the RMD amount for the individual annuity is larger than the allotted penalty-free withdrawal, the annuity company will waive surrender charges to accommodate the RMD amount.

In some cases, annuities can help offset the RMD withdrawal, preserving the asset with a premium bonus (up to 20%) or an enhanced death benefit.

Do Annuity Payments Count Towards RMDs?

Yes, annuity payments, withdrawals, and lifetime income from a qualified annuity will count toward the year’s required minimum distribution amount.

Estate Planning

For those retirees who do not need income from an RMD, leveraging annuities and life insurance could maximize an estate plan for beneficiaries. One could essentially spend the RMD and preserve the entire (or close to) original investment for heirs.

Next Steps

The required minimum distribution (RMD) rule created by the Internal Revenue Service (IRS) prevents taxpayers from using their retirement accounts as a tax shelter. Instead, the IRS ensures taxpayers pay taxes on their retirement savings over time by requiring withdrawals. If you have questions about RMDs or want to discuss your specific situation, don’t hesitate to contact our team for a quote. We are happy to help!

What Is A Required Minimum Distribution, And How Do They Work?  Rmd Calculator

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Frequently Asked Questions

Is RMD required for annuities?

No, RMD is not required for annuities. However, if you have an annuity funded with pre-tax money, such as a traditional IRA, you will be required to take RMD when you reach the age of 72.

Does RMD increase with age?

Yes, the number of your RMD increases as you age. The IRS wants to ensure you do not defer taxes on your retirement savings for too long.

What if I forget to take my RMD?

If you fail to take your RMD, you will be subject to a penalty equal to 50% of the amount you should have withdrawn. So, for example, if your RMD is $1000 and you fail to take it, you will owe a penalty of $500.

You may be able to avoid the penalty if you can show that the failure was due to reasonable cause. Examples of reasonable causes include illness, death, or financial hardship. You will need to provide documentation to the IRS to avoid the penalty.

What is the IRS life expectancy table?

The IRS life expectancy table is used to calculate your RMD. The table is based on your age and your retirement account balance.

What if I have more than one retirement account?

If you have more than one retirement account, you must take an RMD from each account. You can take your RMDs from one or more accounts, but the total amount you withdraw must be at least the amount of your RMD.

For example, if your RMD is $1000 and you have two retirement accounts with balances of $50,000 and $100,000, you could take an RMD of $500 from each account. Or, you could take an RMD of $1000 from one account and withdraw nothing from the other.

You cannot use your RMDs to meet the minimum distribution requirements for other accounts, such as IRAs or 401(k)s.

What are the tax implications of taking an RMD?

The amount of your RMD is considered taxable income. This means you will owe taxes on the money you withdraw from your retirement account. The tax rate that you will owe depends on your marginal tax bracket. For example, if you are in the 25% tax bracket, you will owe 25% in taxes on the money you withdraw.

Does a Roth conversion count as an RMD?

No, a Roth conversion does not count as an RMD. However, you may owe taxes on the conversion if you are not yet 72 years old.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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