The minimum amount you must withdraw from retirement accounts annually after age 73.
A Required Minimum Distribution (RMD) is the minimum amount you may want to withdraw from tax-deferred retirement accounts (Traditional IRA, 401(k), etc.) annually starting at age 73 (recently increased from 72). The IRS calculates RMDs based on account balance and life expectancy. If you don't take the full RMD, you're subject to a 25% penalty (reduced to 10% if corrected timely) on the shortfall. Roth IRAs don't have RMDs during the account owner's lifetime (only beneficiaries must take RMDs after inheritance). RMDs are taxed as ordinary income. To reduce RMDs while maintaining charitable intent, "qualified charitable distributions" allow direct IRA distributions to charities at age 70.5+. Planning around RMDs is important in retirement; some retirees arrange distributions to minimize taxes or coordinate with other income.