You are required to take a distribution from your traditional IRA and other tax-deferred retirement plans, such as 401(k) accounts and 403(b) accounts, once you reach age 70½. This is referred to as the required minimum distribution (RMD). Failure to take the RMD may result in the assessment of a 50% tax on the difference between the RMD amount and the actual amount distributed. This is a significant tax penalty and can be avoided through proper planning. More information on required minimum distributions can be found in IRS Publication 590 available at www.irs.gov.
The required minimum distribution rules do not apply to Roth IRAs, however. Unlike other types of tax-deferred retirement savings plans, there is no requirement for Roth IRA owners to withdraw funds upon reaching age 70½.
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