Required Minimum Distribution (RMD) Common Questions
A required minimum distribution (also called an RMD or MRD) is a yearly, mandatory withdrawal from a tax-deferred retirement account, like a traditional IRA, 401(k), or 403(b) plan, which you must start taking when you reach the IRS defined age. This does not include Rabbi Trust balances, if applicable.
This was adapted from an article published by Fidelity Investments, which serves as our record keeper.
When you turn 72 years old, the IRS requires you to take an RMD from a workplace saving plan by December 31 each year. However, if this is the first year you are required to take an RMD, you have the option to delay it until April 1 of the year after you reach age 72. If you defer your first RMD until April 1, then you will receive two RMDs that year. The first RMD must be distributed by April 1 for the prior tax year, and the second RMD must be distributed by December 31, for the current tax year.
If you continue to work for an eligible employer beyond age 72, you might not have to take an RMD until you retire.
Please contact RPB to learn when you'll need to start your required minimum withdrawals.
You can opt to take one-time distributions for your RMDs year after year, but the easiest way to satisfy your RMD is by setting up automatic withdrawals. This way, you avoid the potentially costly consequences of forgetting to take your RMD. Distributions can be taken in the form of a check sent to you, or a transfer to your bank, brokerage, or cash management account. You choose when you want to receive the funds, monthly, annually, or a schedule of your choosing.
Call Fidelity at 800-343-0860 to discuss your options.
Fidelity calculates your RMD amount by dividing your retirement account balance as of December 31 of the previous year by your life expectancy factor, which you can find in the IRS’s Uniform Lifetime Table in IRS Publication 590-B.
If your spouse is more than 10 years younger than you, and they will be the sole primary beneficiary for the entire distribution calendar year, Fidelity will use the IRS's Joint and Last Survivor Table to calculate your RMD.
Yes, you may take more than the RMD amount from your RPB plan in a given year.
If you continue to work for an eligible employer beyond age 72 you may be able to delay taking RMDs from your workplace savings plan until April 1 after the year you retire. However, you will need to submit a deferral form to RPB for each year you continue to work.
Contact RPB if you have questions about when you need to start taking your RMDs.
Federal income tax will be withheld from the taxable portion of your distribution in accordance with the IRS periodic wage withholding table and your withholding election form on file. If you have not made withholding elections, then the IRS default withholding option of married and three allowances will be used. State income tax will be withheld from the taxable portion of your distribution in accordance with your state's withholding requirements and your election.
However, if you elect not to have withholding apply to your payments, or if you do not have enough federal and/or state income tax withheld, you may be responsible for payment of estimated taxes. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient.
Please refer to IRS Form W-4P (Withholding Certificate for Pension or Annuity Payments) at irs.gov for further information
You can choose from three different options for satisfying your RMD each year. These options are:
- By default, you will have your total RMD amount withdrawn and paid to you in either November or December of each year. This will happen if you don't take any action.
- You may request a withdrawal at any time, either in the full amount or a partial amount of your total RMD.
- You may setup a scheduled payment on the recurring basis you prefer, such as, monthly, quarterly, or annually. In this case the withdrawal will be made automatically and distributed to you. The amount will be based upon the number of payments you choose to receive in a year, and the total amount of your RMD for that year, with each payment being a proportion of the total RMD.
Your RMD for each employer-sponsored retirement plan must be distributed from that plan* and does not have an impact on any RMD you may be required to take from your IRAs. The amount of any RMD is not eligible for rollover.
*If you are a participant in more than one 403(b) plan you may choose to aggregate your RMDs and withdraw from a single 403(b) account to satisfy the annual requirement. Please contact your tax advisor for your situation.
You are able to have your RMD sent to you through a direct payment to a bank account of your choosing (Electronic Funds Transfer). Most find the convenience of a direct payment through Fidelity’s electronic payment service their best option. Learn how to get started here. You may also choose to have a check mailed to you.
If your required minimum distribution is not satisfied in a given year, you may be able to receive a waiver and avoid any penalties by filing IRS Form 5329. Make sure to include an explanation for why you missed the deadline and note that you've since taken your distribution. For more information visit irs.gov.
If you do not take an RMD by the annual deadline, it could result in an IRS excise tax equal to 50% of the amount that should have been distributed that year. Income taxes, federal and state (if applicable), will be paid on the taxable amount distributed in the year of distribution.
For example, assume that you are 74 years old, and your RMD for the year is $15,000, but you only withdrew $7,000 by December 31. You will pay income tax on $7,000 that year and potentially be penalized $4,000 [50% IRS excise tax on $8,000 ($15,000 - $7,000)] on the remaining $8,000 that was not distributed. The following year, you will be required to take that year’s RMD amount in addition to the $8,000 that wasn’t distributed in the previous year.