At age 59½ or when you retire, you must start taking withdrawals from your 401(k) account. This is known as a Required Minimum Distribution (RMD). The amount you must withdraw is based on your age and account balance. If you don’t take an RMD, you could face a 50% penalty on the amount you should have withdrawn. RMDs continue for your lifetime and the lifetime of your surviving spouse, if you have one.
Age 72 Required Beginning Date (RBD)
The Required Beginning Date (RBD) for taking withdrawals from a 401(k) is the April 1st following the year in which you reach age 72, or retire, whichever is later.
You must begin taking withdrawals by the RBD, or you will be subject to a 50% excise tax on any amounts not withdrawn. There are two ways to take withdrawals from a 401(k):
- Regular withdrawals: You can take regular withdrawals from your 401(k) each year, up to the amount of your Required Minimum Distribution (RMD).
- Roth 401(k) conversions: You can convert your traditional 401(k) to a Roth 401(k) in order to avoid paying income taxes on your withdrawals. There are no age restrictions for taking Roth 401(k) withdrawals.
If you are not sure how to take withdrawals from your 401(k), you should consult with a financial advisor. They can help you create a withdrawal plan that meets your specific needs.
| Age | RBD | Must begin taking withdrawals by |
|---|---|---|
| 72 | April 1st of the following year | April 1st of the following year |
| 73 | April 1st of the following year | April 1st of the following year |
When to Withdraw from Your 401(k)
The Internal Revenue Service (IRS) requires you to start taking withdrawals from your traditional 401(k) plan once you reach age 72 (70 ½ for those born before July 1, 1949). This is known as a **required minimum distribution (RMD).**
The purpose of RMDs is to ensure that you eventually draw down your 401(k) savings and pay taxes on the money. The amount you must withdraw each year is based on your account balance as of December 31 of the previous year. The IRS uses a life expectancy table to calculate your RMD. This table assumes that you will live for a certain number of years, and it divides your account balance by that number to determine your required withdrawal amount.
You have several options for taking your RMD. You can withdraw the money in a lump sum, or you can spread your withdrawals out over the year. If you do not take your RMD by the December 31 deadline, you will face a 50% penalty on the amount that you were required to withdraw. Once you start taking RMDs, you must continue to take them for the rest of your life.
Mandatory Withdrawal Percentage
The percentage of your 401(k) balance that you must withdraw each year depends on your age. The IRS provides a table of RMD percentages on its website. Here is a summary of the percentages for different age groups:
| Age | Percentage |
|---|---|
| 72 | 3.65% |
| 73 | 3.87% |
| 74 | 4.09% |
| 75 | 4.31% |
| 76 | 4.54% |
| 77 | 4.77% |
| 78 | 5.01% |
| 79 | 5.25% |
| 80 | 5.51% |
| 81 | 5.77% |
| 82 | 6.05% |
| 83 | 6.33% |
| 84 | 6.63% |
| 85 | 6.93% |
| 86 | 7.26% |
| 87 | 7.60% |
| 88 | 7.95% |
| 89 | 8.32% |
| 90 | 8.70% |
| 91 | 9.10% |
| 92 | 9.51% |
| 93 | 9.93% |
| 94 | 10.37% |
| 95 | 10.82% |
| 96 | 11.29% |
| 97 | 11.78% |
| 98 | 12.29% |
| 99 | 12.82% |
| 100 or older | 13.36% |
The Ins and Outs of 401(k) Withdrawals
When it comes to retirement savings, 401(k) plans offer a valuable way to build a nest egg for your golden years. However, once you reach a certain age, you’ll need to start withdrawing funds from your 401(k) account. This article will provide an overview of the rules governing 401(k) withdrawals, including the age at which you must start taking them and the exceptions to this requirement.
Required Minimum Distributions (RMDs)
For most people, Required Minimum Distributions (RMDs) begin at age 72. RMDs are the minimum amount you must withdraw from your 401(k) account each year, regardless of your financial needs. The amount of your RMD is based on your account balance and life expectancy. Failure to take your RMDs can result in penalties from the IRS.
Exceptions to Required Withdrawals
- Delay RMDs until age 75: If you are still working at age 72 and do not own more than 5% of the company you work for, you can delay taking RMDs from your 401(k) until you retire.
- Inherited 401(k): If you inherit a 401(k) account from someone who died before reaching age 72, you will have to start taking RMDs immediately.
Penalties for Not Taking RMDs
If you fail to take your RMDs by the deadline, you will be subject to a penalty of 50% of the amount that should have been withdrawn.
Table: RMD Withdrawal Schedule
Age RMD Percentage 72 3.65% 73 3.86% 74 4.08% 75 4.32% 76 4.57% 77 4.83% 78 5.10% 79 5.38% 80 5.67% When Do You Have to Start Withdrawing 401k?
Individuals are required to start taking required minimum distributions (RMDs) from their traditional IRAs and 401(k) plans once they reach a certain age. The purpose of RMDs is to ensure that retirement savings are eventually withdrawn and taxed. Failure to take RMDs by the required deadline can result in significant penalties.
The age at which RMDs must begin depends on the individual’s circumstances. For most people, RMDs must start by April 1st of the year after they turn 72 (70 1/2 for those who reached 70 1/2 before January 1, 2020).
The amount of the RMD is determined by dividing the account balance as of December 31st of the previous year by the life expectancy factor provided by the IRS. The life expectancy factor is based on the individual’s age and the age of their spouse, if applicable.
Penalties for Late Withdrawals
If an individual fails to take their RMD by the required deadline, they will be subject to a penalty of 50% of the amount that should have been withdrawn. This penalty can be a significant financial burden, especially for those with large retirement savings.
- The penalty is imposed on the amount that should have been withdrawn, not just the amount that was actually withdrawn.
- The penalty is in addition to any income taxes that may be due on the RMD.
- The penalty can be waived if the individual can show that they had reasonable cause for failing to take the RMD.
Age at Which RMDs Must Begin Year in Which RMDs Must Start 70 1/2 (before January 1, 2020) April 1 of the year following the year in which the individual reaches age 70 1/2 72 (after December 31, 2019) April 1 of the year following the year in which the individual reaches age 72 . Bending