RMD refers to the amount of money that must be withdrawn from certain retirement accounts to satisfy the Internal Revenue Service (IRS) regulations and avoid tax penalties. The requirement applies to owners and participants of employer-sponsored retirement plans, traditional IRAs, SEP IRAs, and SIMPLE IRAs who have reached the age of retirement as defined by the IRS. RMD is calculated based on the account balance and the individual’s life expectancy using IRS tables. The purpose of RMD is to ensure that individuals begin withdrawing and paying taxes on their retirement savings to fulfill the original purpose of these tax-advantaged accounts.
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