Understanding your Required Minimum Distribution (RMD)

If you are age 73 or older with a Traditional, Rollover, SEP, or SIMPLE IRA, the IRS requires you to take annual withdrawals called Required Minimum Distributions (RMDs). Learn how to calculate your RMD amount, understand your specific deadline, manage tax withholding, and avoid costly penalties.  

Note:  For those required to take an RMD as an IRA beneficiary, see Understanding Required Minimum Distributions (RMDs) for Inherited IRAs

What Is a Required Minimum Distribution?

A Required Minimum Distribution (RMD) is the minimum amount you must withdraw from your retirement account each year once you reach a certain age. The IRS established RMD rules to ensure that tax-deferred retirement savings are eventually taxed.  

When Do RMDs Begin?

Under current law, you must begin taking RMDs from your Traditional, Rollover, SEP, and SIMPLE IRAs starting at age 73. This age requirement changed in recent years:

  • If you turned 72 before 2023: You were subject to the age 72 rule
  • If you turn 72 in 2023 or later: You are subject to the age 73 rule

Important: The RMD requirement applies even if you are still working.

Understanding RMD Deadlines

Your deadline depends on whether this is your first RMD or a subsequent one.

First-Year RMD (The Year You Turn 73)

When you turn 73, you have two options for your first RMD:

Option 1: Take your RMD by December 31 of the year you turn 73

  • This is the straightforward approach
  • You will take one distribution based on your prior year-end account balance
  • Future RMDs will also be due by December 31 each year

Option 2: Defer your first RMD until April 1 of the following year

  • The law allows you to delay your first RMD
  • However, you will still need to take your second RMD by December 31 of that same year
  • This means taking two distributions in one calendar year

Important: Consult with a tax professional before deciding whether to defer your first RMD.

Subsequent Years

After your first RMD, all future RMDs must be completed by December 31 each year.

Which Accounts Require RMDs?

Accounts Subject to RMDs:

  • Traditional IRAs
  • Rollover IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • 401(k) plans (if you are no longer working for that employer)
  • 403(b) plans
  • 457(b) plans
  • Other qualified retirement plans

Accounts NOT Subject to RMDs:

  • Roth IRAs (during the owner's lifetime)
  • Roth 401(k)s (while still employed, in some cases)

Important: If you have multiple IRAs across different financial institutions, you must calculate the RMD for each account separately. However, you can satisfy your total IRA RMD obligation by withdrawing from one or more of your IRAs in any combination.

Calculating Your RMD

Your RMD amount is determined by applying a Life Expectancy Factor set by the IRS to your account balance at the end of the previous year.  To calculate your RMD:

  1. Log into Client Portal
  2. Click the User menu (head and shoulders icon in the top right corner) followed by Settings
  3. If you manage multiple accounts, select an account by clicking on the account number to popup the Account Selector
  4. Under Account Settings find the Account Configuration section
  1. Click Required Minimum Distribution Calculator
  1. Enter the required information and hit Calculate.

If you have more than one retirement plan, you will need to calculate the RMD for each separately, although the total may be withdrawn from any one or more of the accounts. Please refer to IRS Publication 590-B for additional spousal and beneficiary considerations.

Special Circumstances

  • If your spouse is your sole beneficiary and is more than 10 years younger, additional options are available.  
    • Review IRS Publication 590B
  • If you have multiple IRAs:
    • Calculate the RMD for each IRA separately
    • Add them together for your total RMD
    • You can withdraw the total from one account, split it among accounts, or any combination
  • If you have IRAs at multiple institutions:
    • You must track and calculate RMDs for all accounts
    • You are responsible for ensuring you withdraw the correct total amount
    • Consider consolidating accounts to simplify tracking

Important:  

  • Please refer to IRS Publication 590-B for additional spousal and beneficiary considerations.
  • Advisor and Introducing Broker master accounts can locate the RMD Calculator from the Home page of the Advisor Portal or Broker Portal under the Contacts tab by selecting a client account under the Tools page. The RMD Calculator will only be displayed if the selected account is a Traditional IRA, Rollover IRA or SEP IRA account.

Requesting Your RMD

Once you have calculated your RMD amount, requesting your withdrawal is straightforward:

Through Client Portal:

  1. Log in to Client Portal
  2. Click Transfer & Pay
  3. Select Transfer Funds
  4. Choose Make a Withdrawal
  5. Enter your withdrawal amount
  6. Select your distribution method (check, ACH transfer, wire)
  7. Review and confirm your request

Withdrawal Options

You can receive your RMD via:

  • ACH Transfer: Direct deposit to your bank account (typically 1-3 business days)
  • Wire Transfer: Faster transfer to your bank (same or next business day, fees may apply)
  • Check: Mailed to your address on file (allow additional delivery time)

Timing Considerations

  • Allow processing time: Submit requests well before your deadline
  • Year-end deadlines: Submit requests by mid-December to ensure processing before December 31

Tax Withholding on RMDs

Federal Tax Withholding

RMD distributions are subject to federal income tax. When you request your withdrawal:

  • Default withholding: 10% federal tax withholding applies unless you specify otherwise
  • Elective: Optional withholding percentage from 10%  
  • No withholding: You can elect no withholding and defer tax owed when you file.

State Tax Withholding

Depending on your state of residence, state income tax withholding may also apply. Check your state's requirements.

Missing Your RMD

The Excise Tax

If you fail to take your full RMD by the deadline, the IRS may impose an excise tax on the amount not distributed as required.

How to Correct a Missed RMD

If you realize you have missed an RMD:

  1. Withdraw the missed amount immediately
  2. File Form 5329 ("Additional Taxes on Qualified Plans") with your tax return
  3. Request a waiver of the penalty by demonstrating reasonable cause
  4. Provide an explanation of why you missed the deadline and the corrective steps taken

Avoiding Penalties

  • Set calendar reminders well before your deadline
  • Calculate your RMD early in the year
  • Do not wait until late December to request distributions
  • Keep records of all RMD calculations and distributions
  • Consider automatic distributions to ensure compliance

Tax Forms Issued

Form 1099-R:

  • Issued by January 31 for the previous year's distributions
  • Reports all IRA distributions to you and the IRS
  • Box 7 will show the distribution code
  • You will need this form to complete your tax return

Form 5498:

  • Issued by May 31
  • Reports year-end IRA account balance and contributions
  • Box 11 is checked if you were required to take an RMD
  • Available in Client Portal

Important: You are responsible for ensuring you take the correct RMD amount. These forms report what occurred but do not confirm compliance.

Frequently Asked Questions

How do I calculate my RMD?

A variety of factors determine your RMD. The IRS provides a worksheet (Appendix A, beginning on page 45) for determining your RMD in IRS Publication 590-B, or you may use any of the various online calculators available, including the one provided by the SEC. We suggest you consult a qualified tax professional to discuss your calculation and the tax implications of any IRA distribution.

If you need further assistance calculating your RMD, please contact your local Client Services Center.

You must calculate your RMD separately for each qualifying IRA custodied at Interactive Brokers and any other financial institution, however, the RMD may be satisfied from any single one or combination of IRAs.

What if I forget to take my RMD one year?

Withdraw a missed RMD amount as soon as you realize the error.   You may have to pay an excise tax on the amount not distributed.   

Do I have to take an RMD if I am still working?

Yes. Unlike some employer-sponsored plans, IRAs require RMDs at age 73 regardless of employment status. However, if you are still working and participating in your current employer's 401(k), you may be able to delay RMDs from that specific plan (but not from your IRAs).

Can I take my RMD in installments?

Yes. You can take your RMD in any frequency you choose:

  • Monthly, quarterly, or annually
  • Multiple lump sums throughout the year
  • As long as you have withdrawn the full amount by December 31

What if I have a loss in my account?

Market losses do not eliminate the RMD requirement. Your RMD is based on the prior year-end balance, so if your account has declined in value, you may need to sell investments at a loss to meet your RMD.

Can I satisfy my RMD with in-kind distributions?

Yes. You can transfer securities from your IRA to a taxable account instead of taking cash. The fair market value of the securities counts toward your RMD, and you will owe taxes on that value.

What happens to my RMD if I die during the year?

If you die before taking your full RMD for the year, your beneficiary must take the remaining RMD by December 31 of that year.

Do inherited IRAs have RMDs?

Yes, but the rules are complex and depend on:

  • Your relationship to the original owner
  • When the original owner died
  • Whether the owner had started taking RMDs

Beneficiaries should consult a tax professional about inherited IRA distribution requirements.

Can I roll over my RMD to another IRA?

No. Once you are required to take an RMD, that amount cannot be rolled over or converted to a Roth IRA. You must withdraw it and pay taxes on it.

What if I have both Traditional and Roth IRAs?

Roth IRAs do not require RMDs during your lifetime. You only need to calculate and take RMDs from Traditional, Rollover, SEP, and SIMPLE IRAs.

How does Interactive Brokers notify the IRS of my RMD?

Notification to the IRS is met by checking box 11 of IRS Form 5498, IRA Contribution Information available May 31 within Client Portal.  

Additional Resources

IRS Resources:

Online Calculators & Tools:

Professional Assistance:

  • We strongly recommend working with a qualified tax professional who can assist with your RMD.  Required Minimum Distribution rules can be complex, and individual circumstances vary.  Always consult with qualified tax and financial professionals regarding your specific situation.  This article is provided for informational purposes only and does not constitute tax, legal, or financial advice. IRS rules and regulations are subject to change.

Important: Interactive Brokers does not calculate RMDs for clients. You are responsible for determining your RMD amount.

IRS Circular 230 Notice: These statements are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local, or other tax statutes or regulations, and do not resolve any tax issues in your favor

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