Understanding required minimum distributions for account owners
A required minimum distribution, or RMD, is the minimum amount required to be withdrawn from retirement accounts each year. These retirement accounts include traditional IRAs, simplified employee pension (SEP) IRAs, SIMPLE IRAs, and many employer sponsored retirement plans such as 401(k) and 403(b) plans.
The RMD is designed to ensure that you withdraw at least a portion of the funds in your account over your lifetime – and that you pay taxes on those funds. Failure to withdraw the required minimum will result in a potentially hefty penalty: The amount not withdrawn is taxed at 50%.