One of the benefits of retirement accounts like 401(k)s and traditional IRAs is the upfront tax break you get by lowering your taxable income with contributions, while they also grow tax-free until retirement. However, if you’re familiar with Uncle Sam, you know the IRS eventually wants its cut, and it does so by taxing your withdrawals from these accounts down the road.
To prevent a situation where someone doesn’t make any withdrawals to avoid taxes entirely, the IRS requires minimum distributions (RMDs) that begin the year you turn 73. The amount of your RMD will depend on your current age and account balance at the end of the previous year. Read on to see it in action for someone with $500,000 in their retirement accounts.
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