Understanding
Your Required
Minimum
Distribution
What it is, when
to take it, and
what to do with it.
Make your
RMDs
stress-free
Once you reach age 72 (70½ if you turned
70½ prior to 2020), the IRS requires you
to take money out of your retirement
accounts. These mandatory withdrawals
are called required minimum distributions
(RMDs). This guide can help you calculate,
plan, and manage your RMDs so you can
fulll the IRS requirements without worry
and have the money you need in retirement.
Know when to take your RMD.
Understand RMD timing and learn how to
calculate accurately. Page 2.
Don’t risk a 50% penalty.
If your withdrawal for any given year is less than
your RMD, the IRS may impose a 50% penalty on
the shortfall. Page 4.
Understand the taxes.
Your RMD is taxed as ordinary income at your
personal federal income tax rate. State taxes may
also apply. Page 5.
Put your RMD to work.
If you’re not using your RMD to live on, you can
reinvest it and keep it working for you. Page 6.
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We’re here to help.
Schwab can help you
calculate, plan, and manage
your RMDs and help you
keep your retirement
investments working for you
even after your required
distributions begin.
1
AQualiedRetirementPlanisanemployer-sponsoredplanthatmeets
therequirementsestablishedbytheInternalRevenueService(IRS)
andtheU.S.Congress.Pensions,prot-sharingplans,moneypurchase
plans,cashbalanceplans,457(b)plans,and401(k)sareallexamplesof
qualiedplans,thougheachtypeworksalittledifferently.
You must take an RMD for:
Individual Retirement Accounts (IRAs)
• Traditional
• Rollover
• Inherited
• Simplied Employee Pension (SEP)
• Savings Incentive Match Plan for Employees
(SIMPLE)
Qualied Retirement Plans
1
(QRPs)
• Schwab’s QRP/Keogh
• Individual 401(k)
• 403(b)(7)
You do not need to take RMDs for Roth IRAs
unless you have inherited one. Roth 401(k)
accounts are also subject to RMD rules.
Get help with your RMD. Visit schwab.com/myrmd
or call 1-800-435-4000.
2
2
Ifyouareage72orolder,arestillworking,anddon’townmorethan5%ofthecompanyyou’reworkingfor,youcanpotentiallydelayyourRMDfromaQRP/Keogh
untilyouretire.
3
DuetotheCoronavirusAid,Relief,andEconomicSecurity(CARES)Act,requiredminimumdistributions(RMDs)forIRAsarewaivedfor2020.
4
FairmarketvalueandRMDcalculationsmayneedtobeadjustedtoincludeanytransfersorrolloverstoyourSchwabretirementaccount(s),aconversionfroma
traditionalIRAtoaRothIRAandback,oranycorrectionforsecuritypriceafteryear-end.
Three steps
to taking
your RMD
Step 1: Understand the timing.
Your rst RMD must be taken no later than April 1
of the year following the calendar year in which
you turn age 72. Subsequent RMDs must be taken
by December 31 of each year.
If you wait until April 1 of the year after you turn
age 72 to take your rst RMD, you will have to take
two distributions in the same year: one for the
year you turn age 72 and one for the current year.
This could have additional tax implications.
Example:
If you: You must:
Turn age 70½
after 2019
Take your rst RMD by
April 1 of the year after
you turn 72.
2
Turned age 70½
in 2019
Take your rst RMD by
April 1, 2020 and take
another RMD by
December 31, 2020.
3
Turned age 70½
in 2018 or earlier
Continue taking your
RMD by December 31
each year.
Step 2: Calculate your
distribution.
To determine your IRA RMD, start by listing the
fair market value
4
of your IRAs as of December 31
of the previous year. You’ll need to calculate your
RMD separately for each IRA you own, but you can
take your total RMD from a single IRA or a
combination of IRAs.
RMDs aren’t required for Roth IRAs, so you don’t
have to include them in your calculations.
We can calculate your IRA RMD for you, or
you can use our easy RMD Calculator at
schwab.com/rmdcalculator.
Two factors in your calculation are your age and
life expectancy. Your RMD is typically calculated
based on your life expectancy per the uniform IRS
method. However, if your spouse is more than 10
years younger than you and is your sole beneciary,
you can use the joint life expectancy method,
which could lower your RMD. Visit irs.gov to learn
more about the IRS life expectancy methods.
3
Step 3: Choose how to get
your distribution.
At Schwab, you have several ways to get your
distribution. You can:
• Receive your IRA distribution online.
5
• Set up recurring RMDs through the RMD
Distribution Form or by calling us. Your annual
RMD will be automatically calculated and
then transferred to the account you designate.
• Transfer investments in kind, such as move
stocks, mutual funds, or cash from your IRA
into your nonretirement Schwab account.
• Enroll in the IRA Checkwriting feature at
schwab.com/irachecks—eligibility required.
• Request a check.
You have two ways to request your distribution.
1. To request your IRA distribution online:
• Go to schwab.com/myrmd.
• Log in to your IRA account.
• Follow the instructions.
2. To request your IRA or qualied plan
distribution by mail:
• Call Schwab at 1-800-435-4000, and we’ll
send you a Schwab RMD Request Form.
Tip
If you have qualied plan
accounts, such as a Keogh or
Individual 401(k) or an Inherited IRA,
you must calculate and satisfy your
RMDs for these separately from your
other IRAs. Call 1-800-435-4000 to
learn more.
5
OnlinedistributionsandMoneyLinkarenotavailableforQRPs,Keoghs,
orIndividual401(k)accounts.
Get help with your RMD. Visit schwab.com/myrmd
or call 1-800-435-4000.
4
The RMD amount required by the IRS is based
on the value of your accounts at the end of the
previous year. You must pay income taxes on your
RMD withdrawals. You’re free to withdraw more
than the RMD amount, but you must pay taxes on
that too.
You may be liable for a 50% penalty on
insufcient or late RMD withdrawals. Follow
the IRS guidelines and consult your tax advisor.
Because there’s no RMD for Roth IRAs, you
can’t satisfy your RMD with a withdrawal from
a Roth IRA.
You’ll need to calculate your RMD for each IRA,
but you can take your RMD from a single IRA or a
combination of IRAs. RMDs from QRPs/Keoghs,
Individual 401(k) accounts, or Inherited IRAs must
be calculated separately for each account and
must be taken from their respective accounts.
Use our easy RMD Calculator at
schwab.com/rmdcalculator.
Understand
the IRS
requirements
Tip
Inherited IRAs are also subject
to RMDs, regardless of your age.
See our Inherited IRA guide at
schwab.com/inheritedira.
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Understand
the tax
implications
The total amount of your RMD is taxed as ordinary
income at your personal federal income tax
rate. State taxes may also apply. If you’ve made
a nondeductible IRA contribution, this will not
be taxed. However, your earnings will be taxed
provided you led an IRS Form 8606.
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For any account with an RMD, any distribution
from that account during the year will count
toward that year’s RMD. You may take more than
your RMD in any given year. However, amounts
withdrawn in excess of your annual RMD won’t
satisfy your RMD requirements in future years.
That’s because the IRS requires each year’s RMD
to be calculated using the previous year’s fair
market value.
Remember, you must pay tax
on your RMD.
When you take your RMD, you can have state or
federal taxes withheld immediately, or you may be
able to wait until you le your taxes. Unless you
give us different instructions, the IRS requires us
to automatically withhold 10%
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of any RMD for
federal income taxes. State tax withholding may
also apply.
Each year, withdrawals and any tax withholding
from your Schwab tax-advantaged retirement
accounts will be reported on Form 1099-R to both
you and the IRS. We’re also required to notify the
IRS that you must take an RMD for the year.
6
LearnmoreaboutIRSForm8606atwww.irs.govorbycalling
1-800-829-3676.
7
ForQRPs/KeoghsorIndividual401(k)plans,iftheamountyouwithdraw
exceedswhatyoumusttakefortheyear,we’rerequiredtowithhold20%
oftheoverageforfederalincometax.Statetaxmayalsoapply.Toavoid
the20%withholding,considerrollingoveramountsgreaterthanyour
RMDtoanIRAoranotheremployerplan.
Thisinformationisnotintendedtobeasubstituteforspecic
individualizedtaxorlegaladvice.Wherespecicadviceisnecessaryor
appropriate,Schwabrecommendsconsultingwithaqualiedtaxadvisor.
Tip
RMD tax rules apply to
traditional, rollover, SIMPLE, SEP,
and Inherited IRAs.
Get help with your RMD. Visit schwab.com/myrmd
or call 1-800-435-4000.
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After taking your RMD, you’ll need to decide
whether you want to use the money to live on,
reinvest it so it has the potential to grow, or take
a blended approach. Consider these options:
Use your RMD for living
expenses.
Your distribution can be deposited directly into
your Schwab brokerage account, Schwab Bank
account, to another nancial institution via an
electronic funds transfer, or sent to you by check.
Reinvest your RMD.
A Schwab One
®
brokerage account allows you
to invest in everything from stocks and bonds to
mutual funds, ETFs, and more. With a Schwab
One account, you can access your money by
check, credit card, or phone 24/7.
Rebalance your portfolio.
If your portfolio has shifted from your target asset
allocation over the course of the year, you can use
your RMD as a rebalancing tool. Consider taking
your RMD from an overweighted asset class and
investing the proceeds in a taxable account in an
asset class in which you are underweighted.
Contribute to a college
savings plan.
Consider funding 529 college savings accounts
for your children, grandchildren, or other
beneciaries. These gifts can help reduce the
size of your estate. Some state-sponsored 529
plans offer special income tax advantages to
state residents.
Convert to a Roth IRA.
If you don’t need the assets for retirement and
you don’t plan on making any withdrawals for at
least ve years, you might consider converting to a
Roth IRA. Please note that the 2017 Tax Cuts and
Jobs Act eliminates the ability to recharacterize
(reverse) a Roth conversion. Consult with your tax
advisor before converting. You’ll need to take your
scheduled RMD for the year and pay any taxes
on the conversion, but ongoing RMDs will not be
required. Learn more at schwab.com/roth.
Put your
RMD to work
for you
7
RMD checklist.
1. Incorporate your RMDs into your overall
retirement income plan. Call us to create
a plan or to assess your overall situation.
2. Consider consolidating your retirement
assets. See the big picture and make it
easier to transfer assets.
3. Determine your deadline for taking your
RMD. Make sure you meet your deadline
to avoid IRS penalties.
4. Calculate your IRA RMD at
schwab.com/rmdcalculator.
5. Schedule your IRA RMD online.
Set up recurring distributions so
you don’t have to worry about it. Visit
schwab.com/myrmd.
6. Manage your distribution options. Know if
you plan to reinvest or spend your RMDs.
If you have IRAs at other nancial institutions,
consider bringing them together at Schwab.
When you consolidate your IRAs into one account,
you can:
• Calculate just one RMD and manage it from one
account.
• Set up automatic withdrawals to control your
RMD timing and frequency.
• Get ideas on how to generate retirement income
to last your lifetime.
Schwab makes it simple to manage your RMD
with an annual reminder letter, regular message
alerts, and annual IRA RMD amount tracking on
Schwab.com.
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8
QRPs,Keoghs,andIndividual401(k)accountswillreceiveanannual
RMDnoticationletteronly.
Simplify your
RMD
Tip
Remember to designate your
IRA beneciaries with care because
they may ultimately inherit the assets
in your IRA account.
Get help with your RMD. Visit schwab.com/myrmd
or call 1-800-435-4000.
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RMD
resources
Help when you want it.
When you’re ready to take action, let
us know. We’ll help you manage your
RMDs throughout your retirement.
Call 1-800-435-4000.
To help you plan:
RMD information and FAQs:
schwab.com/yourrmd
Calculate your RMD:
schwab.com/rmdcalculator
Steps for creating your retirement check:
schwab.com/createyourpaycheck
To get help with retirement:
Call us at:
1-800-548-5709
To invest for income:
Fixed Income Specialists:
1-800-626-4600
Annuity Specialists:
schwab.com/annuities or 1-888-311-4889
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Take the next step.
Call 1-800-548-5709 to
schedule an appointment
with a Schwab investment
professional, or visit your
nearest Schwab branch.
Thistaxinformationisnotintendedtobeasubstituteforspecicindividualizedtax,legal,
orinvestmentplanningadvice.Wherespecicadviceisnecessaryorappropriate,Schwab
recommendsthatyouconsultwithaqualiedtaxadvisor,CPA,nancialplanner,or
investmentmanager.
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