Required Minimum Distribution (RMD)

Updated 1 month ago by Chandler Julian

What is a Required Minimum Distribution?

A Required Minimum Distribution (RMD) is a government-required withdrawal from a retirement account that starts once you meet certain age, ownership, and working requirements. The idea behind this withdrawal is to capture tax withholding from the wealth that has accumulated in your retirement account instead of keeping it tax-deferred forever. The amount required to be withdrawn is calculated each year based on your age, account balance, and other withdrawals you may have taken during the year.

 

Do I qualify for an RMD?

You are required to take a minimum distribution if you meet the following scenarios:

  • You are at least 70 ½ and retired
  • You are at least 70 ½, a 5% owner of the company sponsoring the retirement plan

 

How do I know if I am a 5% owner?

If you own 5% or more of the company sponsoring the retirement plan. 

When do I take my RMD?

First RMD

You must take your first RMD by April 1st of the year following when you satisfy either of these two conditions...

  • you are at least 70 ½ years old and are no longer working, or
  • your are at least 70 ½ years old, a 5% owner in the company sponsoring the retirement plan
All RMDs after your first

After receiving your first RMD, your following RMDs are due by December 31 of each year. This also means that if you received your first RMD in April, you will also receive the current year’s RMD by December.

 

What are my distribution options?

Your RMD is not eligible for a rollover to another retirement account. So, it has to be a direct, taxable payment to you each year.

 

Are there any taxes deducted?

Since your RMD is not available for a rollover, you may elect the federal withholding percentage you would like us to withhold at the time of payment. If you make no selection, we will withhold Federal Taxes at a rate of 10% and remit that withholding to the IRS on your behalf. State taxes may also apply depending on your state's requirements. If you have questions about your state's specific tax law, please consult your local tax adviser or accountant.

Upon requesting a distribution, you will also receive a Form 1099-R from Charles Schwab Bank. This form is to be filed along with your annual tax return.

 

How do I request my distribution?

If you choose to receive your RMD earlier than the required April and December dates, you may request the RMD be initiated by completing and return this form.

Distribution forms may be returned to us using any of the three following methods...

  1. upload your form to us using our Secure File Upload - link
  2. mail your form to PO Box 22968 Nashville, TN 37202
  3. fax your form to 1-877-485-4104. 

 

When can I expect my distribution to arrive?

Once your distribution form has been received, the plan administrator must review and approve the distribution.

Once approved, your distribution check will be issued by Charles Schwab Bank. By default, the check will be mailed by USPS. It can take up to 10 days for the check to arrive.


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