Your $750,000 retirement account comes with this RMD — see how much you must withdraw

A new report explains how much money a person must take out from a $750,000 retirement account when Required Minimum Distributions (RMDs) begin. Financial experts say RMDs are mandatory withdrawals the government forces people to take from traditional retirement accounts once they reach the required age.

The rule starts at age 73, which is the current beginning age for RMDs. The report says a 73-year-old with a $750,000 account must take out about $28,302 in the first year, as stated by The Motley Fool. This number comes from the IRS life expectancy table, which is used to decide the RMD amount each year. The life expectancy factor for age 73 is 26.5, and the formula is account balance divided by this number.

Simple RMD calculation explained

A financial planner in the story explained, “RMDs are designed to make sure savers eventually pay taxes on their retirement money.” Experts also say the RMD gets bigger every year, because the life expectancy factor becomes smaller as a person gets older. This means the yearly withdrawal rises even if someone’s account balance stays the same.

RMD tax rules and penalties

The report also says RMDs can push people into a higher tax bracket because the money taken out is treated as taxable income. A retirement advisor warned, “People should plan early so RMDs do not create a surprise tax bill.” Experts suggest some people may shift money into Roth accounts, which do not have RMDs. The report by The Motley Fool says failing to take out the RMD can lead to a 50% IRS penalty on the amount you should have withdrawn.

Advisors recommend people talk to a planner so they know their exact withdrawal amount each year. The report ends by reminding savers that the first RMD deadline is April 1 of the year after they turn 73, and missing it can be costly.

FAQs

Q1. How much is the RMD for a $750,000 retirement account at age 73?

The RMD is about $28,302 in the first year based on the IRS life expectancy table.

Q2. What happens if you do not take your RMD?

You may face a 50% IRS penalty on the amount you were supposed to withdraw.