Required Minimum Distribution

If you are 73 or older and must take a distribution from an IRA but do not want to increase your income, you can have your broker donate that directly to a charity.

Required Minimum Distribution (RMD)

• What it is: An RMD is the mandatory minimum amount the IRS requires you to withdraw each year from a traditional Individual Retirement Account (IRA), 401(k), or other pre-tax retirement plan starting at age 73.

• Purpose: It forces you to start drawing down your tax-deferred retirement accounts so the government can collect ordinary income tax on that money.

• Tax impact: The withdrawn amount counts as taxable ordinary income in the year you take it. Failing to take an RMD results in heavy IRS penalties.