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Required Minimum Distribution RMD

Understanding RMDs

RMD is the minimum amount you must withdraw from your tax-advantaged Retirement accounts once you reach 73 if you were born between 1951-1959, and 75 for those born in 1960 or later. This rule applies to Traditional IRAs, 401(k)s, 403(b)s, and other similar retirement plans. The goal of RMDs is to ensure that individuals do not indefinitely defer taxes on their retirement savings. Understanding how RMDs work is essential for effective financial planning and our experts in this area of the site talk about what we need to do. If you fail to take your RMD, you could face severe tax penalties.

RMDs exist because the IRS wants to collect taxes on the Money you saved in tax-deferred retirement accounts. When you contribute to accounts like a 401(k) or Traditional IRA, you defer taxes until you withdraw the money. RMD withdrawals are taxed as ordinary income. Required Minimum Distributions are an essential part of Retirement Planning, ensuring that tax-deferred savings are eventually taxed, and it is important for Baby Boomers to stay on top of the RMD regulations.

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