November 12, 2014 in Retirement

5 tips for coping with an RMD

RMD. It sounds like a disease — a chronic condition afflicting those who save for retirement in tax-advantaged accounts.

Required minimum distribution

Age of retiree Distribution period (in years)
70 27.4
75 22.9
80 18.7
85 14.8
90 11.4
95 8.6
100 6.3
105 4.5

To calculate the year’s minimum distribution amount, take the age of the retiree on Dec. 31 and find the corresponding distribution period. Then divide the value of the IRA by the distribution period to find the required minimum distribution.

Once they turn 70½, the IRS requires most retirement savers to withdraw a minimum amount of money — a required minimum distribution, or RMD — each year by Dec. 1 from their tax-deferred retirement accounts, including traditional IRAs and 401(k) plans.

For most seniors, RMDs are an expense and a hassle.

In 2009, when the IRS offered an RMD holiday in the aftermath of the economic meltdown, almost no one took a distribution, says Maura Cassidy, Fidelity Investment‘s director of retirement products.

“The average customer doesn’t need the distribution to live on,” Cassidy says. “Many of our customers just deposit it into a cash management or brokerage account.”

If you’re past that big birthday — and already dealing with RMDs — here are a few things to think about this year.

Here’s how to cope with paying an RMD on an IRA certificate of deposit.