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When are RMDs taken within the Planner?
When are RMDs taken within the Planner?

This article explains when Required Minimum Distributions are modeled to be taken and how they are handled.

Nancy Gates avatar
Written by Nancy Gates
Updated over a week ago

Required minimum distributions are mandatory withdrawals required by the IRS to ensure that you pay the income tax on your tax deferred savings accounts during your lifetime. You don’t necessarily need to spend the money, but it has to come out of the tax deferred account and any resulting taxes must be paid. For a primer on RMDs, please press here.

Depending on your birth date, the RMD age is as follows.

If you are born:

  • Before 1/1/1951, your RMDs have already started and nothing changes

  • Between 1/1/1951 and 12/31/1959, then your RMDs must start at age 73

  • After 1/1/1960, then your RMDs will begin at age 75

For the purposes of the Planner, withdrawals from tax-advantaged accounts (e.g. traditional IRAs and 401(k)s) made to pay for modeled expenses from January onwards go towards your RMD requirement. If in the span from January to December you do not have enough withdrawn from retirement accounts, the Planner will model an RMD in December of that year to cover the remaining requirement.

For example, let's say you are age 72 upon entering January of 2025 and have an RMD of $100,000.

If in the course of January to December of 2025 you have automatically withdrawn $80,000 from your traditional IRAs and 401(k)s, the Planner will model an RMD of $20,000 in December of 2025.

If you instead never needed to touch your retirement savings in the year 2025, the entire RMD will be taken in December of 2025 ($100,000).

IRS rules state that you do not have to take a separate RMD from each IRA. However, if you have more than one defined contribution plan, you must calculate and satisfy your RMDs separately for each plan and withdraw that amount from that plan.

This is not the process in the Planner and RMDs may be aggregated from accounts. The account with the lowest rate of return will be used first, allowing accounts with higher returns to continue to grow for the longest period of time. If there are multiple accounts with the same rate of return in a category the Planner will draw down alphabetically. To adjust this simply update the account name and enter something like a 1 in the beginning of title. For example "1 Trad IRA".

Unspent income generated from the RMD is handled within the Planner. It is treated as "Excess Income," and abides by your selection in the Excess Income section of My Plan > Money Flows. What you choose in Excess Income becomes very important then, and you should make sure you've intentionally filled out that section.

For more info on Excess Income, press here.

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