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What are minimum required distributions?

minimum distributions

minimum distributions

New York -  MRD stands for "minimum required distribution." The Internal Revenue Code established these minimums to ensure that you actually use your 401(k) plan account balance for retirement (and not, for instance, to pass onto your heirs). Unless an earlier date is specified by your plan, you must begin to take a withdrawal (known as a minimum required distribution or MRD) from your account at least once a year by April 1 of the year following the year in which you reach 70 1/2, or April 1 of the year following the year in which you retire, whichever is later. However, if you are a 5 percent owner of your employer, you must begin taking MRDs by April 1 following the year you reach age 70 1/2.

In each subsequent year, the minimum required distribution must be made on or before December 31. If you do not take an MRD from your retirement account each year, the Internal Revenue Code imposes a 50 percent penalty tax on the amount that should have been withdrawn in the calendar year. This tax is in addition to regular income taxes.

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