Required Minimum Distributions (RMDs)
Everyone who enters retirement with a traditional retirement account will confront RMDs. The SECURE act of 2019 made changes to Required Minimum Distributions. Consider this article your crash course before retirement.
The RMD is a way for the government to ensure they tax all of your income. As we earn throughout our working lives, we have the ability to save in a tax-deferred retirement account. This “traditional” account removes the tax liability in the year it was earned, and instead assigns the tax liability to the year the owner withdraws it from the account. In the withdrawal year it is taxed as “income”.
The RMD places a clock on the traditional retirement account, requiring a portion of the account to be withdrawn each year. The portion increases each year as you age beyond the initial ‘start age’ of 72.