How to Use Your Account
RMDs are the minimum amounts that the IRS generally requires you to withdraw from traditional, SEP or SIMPLE IRA accounts each year once you turn age 70½.
You’re also required to take RMDs from employer plan accounts [e.g., 401(k), 403(b), 457, money purchase and profit-sharing plans]. Those distributions generally begin when you turn age 70½ or when you retire, whichever is later.
When you retire, it’s expected that you’ll regularly withdraw the tax-deferred money that you’ve accumulated in your retirement accounts. RMDs are designed to help you gradually pay the taxes owed on your retirement assets.
Note: If you don’t withdraw your RMD each year, the IRS will penalize you with a 50% tax on any amount that should have been withdrawn but wasn’t.
We’ll calculate your RMD upon your request. However, our calculation will consider your American Funds accounts individually, and will not consider any other IRA or retirement plan you may have.
Yes. You need your current age, your ending account balance for the previous year and the life expectancy factors found in the IRS Uniform Lifetime Table to calculate your RMD.
Divide your account balance by the IRS life expectancy factor corresponding to your age in the table.
Hypothetical example: Brian is a retired 401(k) participant who turned 70½ on March 31. His daughter, Susan, is the beneficiary on his account. On December 31 of last year, the ending balance in his 401(k) was $262,000. To calculate his RMD for this year, he divides $262,000 by his life expectancy factor of 26.5 years. His distribution amount is $9,886.79.
No. If your spouse is the only beneficiary on your account and he or she is more than 10 years younger than you, then you need to use the joint life expectancy factors in the IRS Joint Life and Last Survivor Expectancy Table to calculate your annual distributions.
Hypothetical example: Jessica is a 72-year-old IRA owner. Her husband, Jeff, is the sole beneficiary on her account. Jeff is 60 years old. On December 31 of last year, Jessica’s ending account balance was $262,000. To calculate her RMD for this year, she divides $262,000 by the joint life expectancy factor of 27.0 years. Her distribution amount is $9,703.70.
You need to calculate RMDs for all of your accounts. If you own more than one IRA, you can withdraw your required minimum directly from each, or you can combine your RMDs and withdraw the total from only one. The same is also true if you have more than one 403(b) account.
RMDs from 401(k), 457, money purchase and profit-sharing plan accounts must be taken separately from each plan.
You can invest RMDs taken from your retirement account in a non-retirement account. The distribution from your IRA or retirement plan account is subject to voluntary income tax withholding because moving money from a retirement account to a non-retirement account is a taxable transaction.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses , which can be obtained from a financial professional and should be read carefully before investing.