Minimum Required Distribution

Minimum Required Distribution

The amount that an IRA must begin to distribute to an annuitant by the age of 70.5 or the age of retirement, whichever is greater. The minimum required distribution may or may not be taxable, depending on the type of IRA. The amount of the minimum required distribution is determined by the value of the IRA, the length of time the annuitant has contributed, and the amount of contributions.

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Minimum required distribution (MRD). A minimum required distribution is the smallest amount you must take each year from your retirement savings plan once you've reached the mandatory withdrawal age.

There are MRDs for 401(k) plans, 403(b) plans, and traditional IRAs, and the maximum age you can reach before they start is usually 70 1/2. If you take less than the required minimum, you owe a 50% penalty on the amount you should have taken.

You calculate your MRD by dividing your account balance at the end of your plan's fiscal year -- often December 31 -- by a distribution period based on your life expectancy. If your spouse is your beneficiary and more than ten years younger than you are, you can use a longer distribution period than you can in all other circumstances.