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Many people aim for the million-dollar mark as a financial milestone, especially when it comes to their retirement savings.
The good news is that having $1 million in retirement savings could carry most people through retirement. The not-so-good news is that having it in a tax-deferred retirement account like a 401(k) or traditional IRA means owing taxes when you make withdrawals in retirement.
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And to ensure you eventually pay your fair share of taxes, the IRS has required minimum distributions (RMDs), which begin the year you turn 73.
The exact amount you’re required to withdraw varies depending on your account balance and age, but to give you an idea, we’ll examine how it could work for someone with $1 million in their retirement account.
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How to figure out your required minimum distribution
Figuring out your RMD for the year is a three-step process:
- Find out your account balance at the end of the previous year.
- Look for the life expectancy factor (LEF) corresponding to your age and marital status (the IRS provides these numbers).
- Divide your account value by your LEF.
Below are the RMDs for someone single with $1 million in their retirement account as of the end of 2024:
| Age | Life Expectancy Factor | Required Minimum Distribution |
|---|---|---|
| 73 | 26.5 | $37,736 |
| 74 | 25.5 | $39,216 |
| 75 | 24.6 | $40,650 |
| 76 | 23.7 | $42,194 |
| 77 | 22.9 | $43,668 |
| 78 | 22.0 | $45,455 |
| 79 | 21.1 | $47,393 |
| 80 | 20.2 | $49,505 |
Source: IRS. Table by author. RMDs rounded to the nearest dollar.
If you don’t take your RMD, you’ll face a penalty of 25% of the amount you failed to withdraw. However, if you correct your mistake and take your RMD within two years of the missed deadline, you could reduce the penalty to 10%.
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