RMD
Business & Finance abbreviation · Personal Finance
| Stands for | Required minimum distribution |
|---|---|
| Categories | Business & Finance |
RMD stands for Required minimum distribution, a personal finance abbreviation.
Minimum amount that owners of traditional IRAs and most employer retirement plans must withdraw each year once they reach the starting age, currently 73. It is calculated by dividing the prior year-end balance by an IRS life-expectancy factor, and the withdrawal is taxed as ordinary income.
Example: Don't forget to take your RMD before December 31, or the IRS can charge a 25% excise tax on the shortfall.
Usage notes
SECURE 2.0 raised the starting age from 72 to 73 in 2023 and will raise it to 75 for people born in 1960 or later. The first RMD can be postponed until April 1 of the following year, at the cost of taking two in that year. The missed-RMD penalty fell from 50% to 25%, or 10% if corrected promptly. Original owners of Roth IRAs and, since 2024, Roth 401(k)s are exempt.
Related abbreviations
More personal finance abbreviations
- PPF – Public Provident Fund
- PSLF – Public Service Loan Forgiveness
- QDRO – Qualified domestic relations order
- QLAC – Qualified longevity annuity contract
- RDSP – Registered Disability Savings Plan
- RESP – Registered Education Savings Plan
- Roth 401(k) – Roth designated account within a 401(k) plan
- Roth IRA – Roth individual retirement account
- RRIF – Registered Retirement Income Fund
- RRSP – Registered Retirement Savings Plan
- SEP IRA – Simplified Employee Pension individual retirement account
- SEPP – Substantially equal periodic payments