Calculate your RMD

Quick answers to Frequently Asked Questions (FAQs) about RMDs

What's an RMD or mandatory IRA withdrawal?

Depending on your date of birth, the IRS requires you to take money out of most types of retirement accounts. These mandatory withdrawals are called required minimum distributions (RMDs). Note: The RMD age changed to 73 when the SECURE Act 2.0 passed in 2022. If you turned 72 before 2023, you may be subject to RMDs. If you turned 72 in 2023, your RMDs will begin at age 73.

When do I take my first RMD?

In general, you should take your RMDs by the end of the year (December 31).

In the year you turn RMD age, you have the option to complete your first RMD by April 1 of next year. If you do this, you'll need to take two distributions in the same tax year:

• Complete your first RMD by April 1.
• Complete your second RMD by December 31.
• This could have tax implications. For more information, consult with our tax advisor.

What happens if I don't take my RMD?

If you don't make withdrawals, you'll be subject to pay a penalty.

The new SECURE Act 2.0 reduces the 50% penalty for missing an RMD effective for RMDs in 2023, it does not impact missed RMDs in 2022. Under SECURE 2.0 if you don't take your RMD by the IRS deadline, a 25% excise tax on insufficient or late RMD withdrawals applies. If the RMD is corrected timely, the penalty can be reduced down to 10%. Follow the IRS guidelines and consult your tax advisor. 
 

Which retirement accounts are subject to RMDs?

You must take an RMD for these types of retirement accounts:

IRAs (Individual Retirement Accounts)

• Traditional
• Rollover
• Inherited
• SEP (Simplified Employee Pension)
• SIMPLE (Savings Incentive Match Plan for Employees)

Qualified Retirement Plans¹ (QRPs)

• QRP/Keogh
• Individual 401(k)
• 403(b)(7)

Are Roth IRAs subject to RMDs?

Generally, no, you don't need to take an RMD for a Roth IRA unless you inherited one.

Is an inherited IRA/beneficiary IRA subject to RMDs?

Because the SECURE Act changed the laws regarding inherited IRAs, people will generally fall under one of two rules. Those under the old rules may be required to take RMDs from inherited IRAs. Those under the new 10-year rule may or may not have an annual RMD. We recommend consulting with your tax or financial advisor, as these new rules can be complex. Learn more about beneficiary types and distribution options.

Who falls under the old rules for inherited IRA distributions?

If the IRA owner passed away before 2020, you will likely fall under the old distribution rules. Certain eligible designated beneficiaries can also fall under the old distribution rules. We recommend consulting with your tax or financial advisor to determine which distribution rules apply in your situation. Learn more about beneficiary types and distribution options.

Who are eligible designated beneficiaries?

• Surviving spouses 
• Minor children up to age of majority 
• Disabled individuals—under strict IRS rules 
• Chronically-ill individuals 
• Individuals no more than 10 years younger than the IRA owner, such as siblings near the same age

Who's subject to the 10-year rule for inherited IRAs and how does it work?

If the original account owner died after 2019 and you (as an individual) do not meet the requirements to be considered an eligible designated beneficiary, you will generally be considered a designated beneficiary and be subject to the 10-year distribution rules. Under this rule, all assets in the account need to be distributed no later than the end of the 10th year from when the original account owner died. Furthermore, if the original account owner was already required to take RMDs at the time of their death, the designated beneficiary will also need to take RMDs during the 10-year period. If the decedent died before RMDs were required to begin, no RMDs are required during the 10-year period. If you fail to distribute all of the assets before the end of the 10th year, those assets will be subject to the RMD excise tax of 25% (for RMDs due after 2022).

Use our Inherited IRA RMD calculator to help you make these determinations.

Which calculator do I use if I inherited an IRA from my spouse?

You can use the Traditional IRA calculator if you've inherited an IRA from a spouse.

How is my RMD calculated?

The amount of your RMD is usually determined by the fair market value (FMV) of your IRA as of December 31 of the previous year, factored by your age and your life expectancy using the uniform life expectancy method. Sometimes FMV and RMD calculations need to be adjusted after December 31. If you had a transfer or rollover to your Schwab retirement account(s), a conversion from a traditional IRA to a Roth IRA and back, or any correction for security price after year-end, please call us at 877-298-8010 so we can recalculate your RMD.

Can I take more than the RMD withdrawal amount?

Yes, you can withdraw more than the RMD from your IRAs without IRS penalty. Remember, these withdrawals will generally be taxable as ordinary income and won't satisfy your RMD requirements in future years. We recommend consulting with your tax advisor.

Do I have to pay taxes on my RMD from a tax-deferred account?

The total amount of your RMD is generally taxed as ordinary income at your personal federal income tax rate. State taxes may also apply. Your tax liability and any tax withholding you elect are based on your home (legal) address.

Can I reinvest my RMD back into a tax-advantaged retirement account?

No, RMDs can't be reinvested back into an IRA or 401(k), or rolled into another tax-favored retirement account. So, if you don't need it for living expenses, what can you do? Invest it in a taxable brokerage account. Save it in a bank account. Donate to a charity. Contact us for ideas suited to your needs.