Once you reach age 70½, you must withdraw at least a minimum amount—your required minimum distribution—each year from your tax-deferred retirement savings accounts. This includes your IRAs (with the exception of Roth IRAs) and any qualified retirement accounts you hold with a former employer.
Generally, you must take your first RMD by April 1 of the calendar year following the year you turn 70½. (Participants in employer plans who are still working at age 70½ may be permitted to wait until April 1 of the calendar year following the year they retire.) For each subsequent year, you'll need to take your annual RMD by December 31.
If you're age 70 1/2 or older Vanguard will automatically calculate the RMD amount each year for your tax-deferred IRAs and employer-sponsored retirement accounts held at Vanguard. Once enrolled, you can view your RMD service online. In addition to calculating your RMD amount, Vanguard's RMD Distribution Service, a free service, allows you to set up your RMD to be automatically distributed each year.
To perform the calculations yourself, use our Required Minimum Distributions kit. Each year's RMD is equal to your retirement account balance as of December 31 of the previous year (adjusted for any outstanding rollovers, asset transfers, or conversions completed during the prior year that are recharacterized in the current one) divided by your life expectancy factor according to the Uniform Lifetime Table. (If your spouse is your sole beneficiary and is more than ten years younger than you, use the Joint Life and Last Survivor Table. It's available at www.irs.gov.)
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Allow 10 to 15 minutes to enroll in Vanguard's RMD Service online. Leave more time if you are taking RMDs from an IRA that you inherited or from a small business retirement plan, because you will have more options to consider or more information to provide.
If you are an IRA beneficiary, the online enrollment process is more complex because you have more decisions to make. If you're enrolling in our RMD Service, allow about 30 minutes for the enrollment process.
When a beneficiary becomes entitled to an IRA from an account owner who died before he or she was required to begin taking RMDs (April 1st of the year following the year in which the owner turned 70½), the beneficiary can choose one of two methods of distribution: over his or her lifetime or within five years (the "five-year rule").
Any individual beneficiary may elect to distribute the inherited IRA assets over the five years following the owner's death. The distribution must be completed by the end of the year containing the fifth anniversary of the owner's death. Any non-individual beneficiary (except for a qualified trust) must use the five-year rule if the owner died before beginning to take RMDs.
Note: Vanguard's RMD Service doesn’t accommodate accounts that are being distributed according to the five-year rule. If you've elected, or are required, to use the five-year rule for your inherited account, you should consult a tax advisor to calculate your required minimum distribution.
If you are a nonspouse beneficiary of a deceased plan participant and rolled a distribution of plan assets into an inherited IRA by December 31 of the year following the participant's death, you can take RMDs from the inherited IRA following the rules applicable to IRAs. If the rollover took place after December 31 of the year following the participant's death, the distribution rules under the employer plan carry over to the IRA. You should contact the plan sponsor or a tax advisor to determine the rules applicable to your situation.
If you inherited your IRA or employer-sponsored retirement account from:
then you inherited your account from the original owner.
In all other cases, you did not inherit your account from the original owner. If the account of the individual you inherited the IRA from was registered in that person's name as beneficiary of ("BENE OF") the original owner, you did not inherit your IRA from the original owner. If you are not certain whether or not the original owner's surviving spouse "assumed" the account and became its new owner, contact us.
Beneficiaries of a deceased inherited IRA owner (i.e., beneficiaries of a beneficiary) must generally continue taking required minimum distributions (RMDs) based on the schedule established by the deceased inherited IRA owner; beneficiaries of the deceased inherited IRA owner can't use their own life expectancies when calculating RMDs.
Situations where you inherit the retirement account from the original owner:
A situation where you do not inherit the retirement account from the original owner:
Several years may have passed since you first named IRA beneficiaries, and your designations may be obsolete due to marriage, divorce, births, or deaths. Your designations must be accurate because they can affect the amount of your required minimum distribution.
For example, if your sole primary beneficiary is your spouse, and your spouse is more than ten years younger than you, you'll use a different life expectancy table and probably make a smaller distribution. (See How do I calculate my RMD?) You can review and update your beneficiary designations for your Vanguard accounts online.
Consider moving them to Vanguard. All of your retirement accounts will then be eligible for our RMD Service. If you are over age 70½, remember to take the current year's RMD before transferring or rolling over each account. We can even help you with the transfers. Learn more about moving your IRAs to Vanguard
Once you determine your RMD, you can satisfy it with withdrawals from any combination of IRAs. For instance, if you have three IRAs with a combined RMD of $4,500, you can take that amount from any of the IRAs.
If you have employer-sponsored retirement plans, such as 401(k), 403(b), money purchase pension, or profit-sharing plans, you'll need to calculate each RMD separately and withdraw the appropriate distribution from each plan.
You can tap any of the funds in your retirement account. Generally, you have three options. You can withdraw a specific amount from each fund, withdraw a certain percentage of your RMD from each of several funds, or withdraw from each fund according to its share of the IRA assets.
Your main consideration when making withdrawals should be to maintain or achieve a desired asset allocation—the balance between stocks, bonds, and cash investments in your portfolio. To learn more about the components of the funds in your account, visit Funds, Stocks & ETFs. To consult with a licensed financial advisor, consider our guidance and advice services.
If you don't need your RMD for current living expenses, you can keep it working for you by immediately reinvesting it in a Vanguard nonretirement account. (If you do not already have such an account, you'll need to create one.) You can purchase any Vanguard fund with your RMD, as long as you meet the fund's minimum investment requirement. If your nonretirement portfolio needs rebalancing, you can use the RMD to purchase more of your underweighted asset class. Our RMD Service can automatically transfer your distribution to a Vanguard nonretirement account if you wish.
Yes, but not through Vanguard's RMD Service. You can arrange single distributions from your IRA at any time online through your Vanguard.com account or by completing and submitting an IRA Distribution Request form.
Alternately, you can sign up for our Automatic Exchange Service and schedule transfers from your IRA to a nonretirement Vanguard account. You can also use our Automatic Withdrawal Service to schedule regular withdrawals from your IRA to your bank or credit union account.
The provision allowing you to use RMDs for charitable contributions expired December 31, 2014. It's unknown if the qualified charitable distribution (QCD) rule will be renewed in 2015 or in any future years. Vanguard will monitor any potential changes to these regulations. In the meantime, you may wish to consult a professional tax advisor for specific guidance on your personal situation.
Distributions from a traditional, deductible IRA are fully taxable as ordinary income. If you are taking distributions from an IRA which was partially or fully funded with nondeductible contributions, some or all of your RMD will be exempt from further tax. (Use IRS Form 8606 to calculate and report the exempt portion.)
RMDs from an inherited Roth IRA are not taxed unless they represent a return of earnings and then only if the earnings are distributed within five years after the Roth IRA was established.
Then you may be liable for a federal penalty equal to 50% of the shortfall. For example, if your RMD is $20,000 and you distribute $15,000, you may be assessed a $2,500 penalty.