Are you one of the millions of people using an IRA to save for retirement? According to a 2016 study, Americans hold nearly $2.5 trillion in assets inside IRA accounts.1 Most of those assets are held in traditional IRAs, which offer tax-deferred growth and tax-deductible contributions.
Traditional IRAs, 401(k) plans and similar qualified accounts are popular savings tools because of their tax-favored treatment. However, assets in those accounts don’t avoid taxation forever. At some point, the IRS wants you to take taxable distributions from your qualified retirement plans.
The latest you can defer distributions from an IRA or 401(k) is age 70½. At that point, you must begin taking required minimum distributions, also known as RMDs. Your RMD amount is based on your age and your account balance. As you get older, you usually have to withdraw a higher percentage of your account balance each year.