◈ GLOSSARY · RETIREMENT
RMD (Required Minimum Distribution).
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
The minimum amount the IRS forces you to withdraw each year from tax-deferred retirement accounts (traditional IRA, 401(k), 403(b)) starting at age 73. The amount is your prior-year December 31 balance divided by an IRS life-expectancy factor. Missing one used to cost a 50% penalty on the shortfall — SECURE 2.0 cut it to 25%, or 10% if corrected promptly. Roth IRAs have no RMDs for the original owner.
◈ IN PRACTICE
Example
A 75-year-old with a $500,000 traditional IRA uses a 24.6 distribution factor: $500,000 / 24.6 = about $20,325 that must come out this year and be reported as ordinary income.