How Much Is the Required Minimum Distribution (RMD) if You Have $500,000 in Your Retirement Accounts?
Key Points
Required minimum distributions (RMDs) become an annual obligation once you turn 73.
The size of your RMD will depend on your current age and the balance in your tax-deferred retirement accounts.
Failing to make your withdrawal will result in a penalty worth as much as 25% of the RMD.
Retirement accounts like the 401(k), 403(b), and traditional IRA are tax-deferred, meaning you get a tax break upfront (the ability to deduct contributions from your taxable income), but you must eventually pay taxes on your withdrawals.
To avoid situations where someone skips making withdrawals entirely to avoid the tax obligation, the IRS imposes required minimum distributions (RMDs) that kick in when you turn 73. Knowing the process behind RMDs is necessary to avoid costly penalties.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
Image source: Getty Images.
Your RMD is based on two key factors: the total value of your retirement account(s) at the end of the previous year and the age you'll turn in the current year. For example, if you're currently 75 but turn 76 this year, 76 would be the age used. Once you have those two pieces of information, figuring out your RMD is a straightforward two-step process:
- Look at the provided IRS life expectancy table for your life expectancy factor (LEF). The Uniform Lifetime Table is what applies to most retirees. If your spouse is your sole beneficiary and they're more than 10 years younger than you, you'll use the Joint Life Expectancy Table.
- Divide your account balance(s) at the end of the previous year by your LEF.
Assuming you had $500,000 in your account(s) at the end of 2024, below is what your RMDs would be for ages 73 to 80 (the official chart goes to age 120 ):
| Age | Life Expectancy Factor | Required Minimum Distribution |
|---|---|---|
| 73 | 26.5 | $18,868 |
| 74 | 25.5 | $19,608 |
| 75 | 24.6 | $20,325 |
| 76 | 23.7 | $21,097 |
| 77 | 22.9 | $21,834 |
| 78 | 22.0 | $22,727 |
| 79 | 21.1 | $23,697 |
| 80 | 20.2 | $24,752 |
Calculations by author. RMDs rounded to the nearest dollar.
Failing to take your RMD could result in a penalty equal to 25% of the amount you were supposed to withdraw. However, if you correct the mistake and you take your RMD within two years of the missed deadline, you can reduce the penalty to 10%.
The $23,760 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.
View the "Social Security secrets" »
The Motley Fool has a disclosure policy.
Recommended Articles
