How Is Your Required Minimum Distribution Amount Calculated?

Your RMD is not a fixed dollar amount, it changes every year based on your account balance and your age. The IRS calculates your RMD by dividing your account balance as of December 31 of the prior year by a life expectancy factor from the IRS Uniform Lifetime Table. For example, if your IRA balance was $500,000 on December 31 and your life expectancy factor is 26.5, your RMD for the year would be roughly $18,868. As you age, the life expectancy factor decreases, which means the percentage of your account you must withdraw each year gradually increases. Your IRA custodian can often calculate your RMD for you, but it is still worth understanding how the number is derived so you can verify it is correct.