RMDs Explained in 5 Minutes: Required-Minimum-Distribution Basics

Required-Minimum Distributions, or "RMDs," can be both complicated and confusing. And there are numerous subtleties and portfolio-specific caveats.

However, there are also a few basic, foundational points about RMDs that can be explained in a fairly simple and straightforward way.

In this video, I attempt to provide an overview of RMDs. I frame my brief discussion around the six (6) information-gathering questions: Who? What? Where? When? Why? How?

In sketching answers to these questions, I discuss things such as the RMD age (raised from 70 1/2 to age 72, by the 2019 SECURE Act*) and the math of RMD calculation (the FMV* of your RMD-susceptible retirement account[s] divided by your distribution-/life-expectancy factor, a.k.a. your "RMD divisor).

We list the basic retirement-account types that are relevant in RMD-related discussions. These include Traditional Individual Retirement Accounts (IRAs), as well as employer-sponsored, defined-contribution, pre-tax-funded plans such as the 401(k), 403(b), and 457(b) and post-tax plans like the Roth 401(k). (But RMDs do not generally apply to Roth IRAs.)

I also speak to the mechanics of requesting a distribution from your financial institution, and say a few words about Internal Revenue Service (IRS) forms such as the informational 5498 and the 1099-R.

Furthermore, I mention the 50% "excise-tax" penalty for not taking your RMD.

Disclaimer: I am not a financial adviser. This video is for general informational or entertainment purposes, only. Nothing herein should be construed as providing financial, insurance, investment, legal, retirement, savings, tax, or any other sort of advice. If you require personalized evaluations or recommendations, consult licensed experts in your area.

"SECURE" Act - Setting Every Community Up for Retirement Enhancement Act (December, 2019);
FMV = Fair Market Value