Required Minimum Distribution (RMD)

Required Minimum Distribution (RMD) refers to the minimum amount individuals must withdraw from certain tax-advantaged retirement accounts once they reach a certain age. The purpose of the RMD is to ensure that individuals do not indefinitely defer paying taxes on retirement account funds. These accounts, such as traditional Individual Retirement Accounts (IRAs) and employer-sponsored retirement plans like 401(k)s, provide tax advantages during accumulation, allowing contributions and investment earnings to grow tax-deferred.