October is the month to ask. December is the deadline.
The required amount has to leave the retirement account. It does not have to be spent by Friday.
A traditional 401(k) postponed tax. It did not cancel it. At a certain age the IRS requires you to start taking money out of most traditional workplace plans and traditional IRAs so the deferral does not last forever. That withdrawal is the required minimum distribution, and people call it the RMD. The rule is a calendar problem. Handled in the fall, it is dull. Discovered in April, it is expensive.
When it starts
For most people reading this who were born before 1960, the age is 73. If you were born in 1960 or later, the age moves to 75. Birthdays near the legal seam are exactly the kind of thing to confirm on the IRS page, not to settle with a neighbor. Your first required withdrawal is generally due by April 1 of the year after you reach that age. Every later one is due by December 31.
Waiting until that first April 1 can put two withdrawals into one tax year: last year’s, taken in the spring, and this year’s, still due by December 31. Some people would rather take the first one in the year they reach the age, so the income is split. A tax preparer can tell you which is kinder on your return. The custodian can tell you the dollar amount. Those are different phone calls, and you may need both.
Which accounts, and which dollars
If you are still working for the company that sponsors the plan, and you do not own 5 percent or more of that company, the plan may let you delay the RMD from that current plan until you retire. Read the previous sentence again with the word “that” in it. An IRA does not get the delay. A 401(k) parked at a former employer usually does not either.
A designated Roth account inside a 401(k) is treated differently. Starting in 2024, the original owner generally does not take a lifetime required withdrawal from the Roth portion. The traditional portion still follows the rule. Money you inherited is a third subject, with its own clocks. Do not blend the three in your head and then move the money. Ask the custodian to label which bucket is which before you withdraw.
How the amount is figured
The usual arithmetic is the account balance on December 31 of the prior year, divided by a life-expectancy factor from the IRS Uniform Lifetime Table. A spouse more than ten years younger, who is the sole beneficiary, can mean a different table. You do not have to do the division on a napkin. The plan or the IRA custodian will usually calculate it, and you can ask them to send the required amount automatically each year so December is not a scavenger hunt.
Taking the money out of the retirement account is the requirement. Spending it is not. You can move what you do not need into an ordinary savings or brokerage account and pay the tax that is due. What you generally cannot do is put the required dollars back into the 401(k). Once the RMD is out, it is out.
If you missed one
There is an excise tax on the amount you were supposed to withdraw and did not. Under current rules it is 25 percent of what you missed, and it can drop to 10 percent if you correct it in time. Do not guess the form from memory. Call the custodian and a tax preparer the week you notice, and read the IRS page before you file. The penalty is smaller than it used to be. It is still not a tip.
Put a note on the calendar for October: “Ask each custodian if an RMD is due this year, and from which account.” One phone call per statement. Write down the amount, the deadline, and whether they will send it without being asked again. That is the whole craft.
Sources to read yourself
A note from the desk
This is general education, not tax, legal, or investment advice. Rules change, and your plan document controls your account. Before you move money, ask the plan administrator or a tax professional.