Money in a traditional retirement account has not been taxed yet. Required minimum distributions are the mechanism that ends the deferral on a schedule rather than leaving it to the account holder.
Deferral creates a claim the government has not collected
Contributions to a traditional account reduce taxable income in the year they are made, and investment growth inside the account is untaxed while it remains there.
The tax is owed on withdrawal. Until then, the balance contains an unpaid liability whose eventual size depends on future withdrawals and rates.
Without a requirement to withdraw, an account holder with other resources could postpone that collection for decades, which is the outcome the rules foreclose.
The amount is a balance divided by a life expectancy factor
The calculation takes the account balance at the end of the prior year and divides it by a factor drawn from tables published by the Internal Revenue Service.
Factors decline with age, so the fraction that must be withdrawn grows over time. The design distributes the account across a remaining life expectancy rather than emptying it at once.
A separate table applies when a spouse who is significantly younger is the sole beneficiary, producing a smaller required amount.
Account type determines whether the rule applies
Traditional individual retirement accounts and most employer plans are subject to the requirement. Roth individual retirement accounts are not subject to it during the original owner's lifetime, since those contributions were already taxed.
Rules for inherited accounts follow a different framework, with time limits on full distribution that depend on the beneficiary's relationship to the original owner and when the death occurred.
Legislation has changed the starting age and the inherited-account rules more than once, so the current statutory position is what governs any particular year.
Aggregation rules differ by account type
An individual with several traditional individual retirement accounts computes the requirement for each and may take the total from any one of them. The calculation is per account; the withdrawal is not.
Employer plan accounts generally do not permit that aggregation, so each plan must distribute its own amount separately.
The consequence of missing it is a penalty tax
Failing to take the required amount triggers an excise tax on the shortfall, with a reduced rate available when the failure is corrected promptly. Relief can be requested where reasonable cause exists.
Because custodians calculate and often automate the distribution, most failures involve accounts that were overlooked, such as an old employer plan left behind.
The rules are technical and change with legislation, so an account holder approaching the starting age should confirm the current requirements with a qualified professional.