How Retirees Can Easily Calculate Their Required Minimum Distributions

At 73, retirees dealing with medical costs also have to manage their required minimum distributions (RMDs). RMDs are yearly withdrawals retirees must make from their tax-deferred accounts like 401(k)s, 403(b)s, and some IRAs. These withdrawals are subject to income tax. Calculating the right amount isn’t easy – it’s not just a percentage of your savings.

“Your account custodian will calculate your RMD each year, but you’re responsible for ensuring the amount is correct and the distribution is made,” says Eric Heckman, CEO of Heckman Financial. “You can do the math yourself by dividing your prior year-end account balance by the life expectancy factor next to your age on the IRS table.” The life expectancy factor is the IRS’s estimate of how long someone your age is expected to live. For example, a 75-year-old has a factor of 24.6. So, a 75-year-old with $250,000 in a 401(k) would need to take a $10,162 RMD that year.