What's the required minimum distribution from a $400,000 retirement account?
Summary
Required minimum distributions (RMDs) are yearly withdrawals that people must take from most retirement accounts starting at age 73. For a retirement account with $400,000, the amount you must withdraw grows as you get older, and these withdrawals are taxed as regular income.Key Facts
- RMDs start at age 73 for most traditional IRAs and 401(k)s.
- The RMD amount is calculated by dividing the account balance by a life expectancy factor given by the IRS.
- At age 73, with $400,000 saved, the minimum withdrawal is about $15,094.
- By age 80, the minimum withdrawal rises to about $19,802.
- The life expectancy factor goes down as you age, increasing the withdrawal percentage.
- RMDs are treated as ordinary income by the IRS, which can raise your tax bill and affect Social Security and Medicare costs.
- Missing an RMD can lead to a penalty of up to 25% of the amount you should have withdrawn.
- Withdrawals from multiple IRAs can be combined, but 401(k) RMDs must be taken separately from each plan.
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