Skip to main content
Education Center » What you need to know about turning 70 1/2

What you need to know about turning 70 1/2

What You Need to Know About Turning 70_220

You may not plan to celebrate turning 70½ with a birthday cake and candles, but it's a big milestone... at least when it comes to your retirement assets.

If you don't need to tap your tax-advantaged retirement account for income during the early years of your retirement, it's a good idea to delay distribution for as long as possible. The continued impact of tax-deferral may help you accumulate the money you need for a long retirement.

However, generally speaking, starting in the year you turn 70½ and every year thereafter, the IRS requires that you take required minimum distributions (RMDs) annually from your employer-sponsored retirement plans as well as any traditional IRAs you may own.

The calculations, rules and regulations around RMDs can be tricky—especially if you have multiple retirement accounts. But, it's important to take the time to understand them because failure to satisfy your minimum distribution requirements can lead to the imposition of a substantial additional tax.

Keep reading for helpful information, and remember that it’s always a good idea to consult with your tax advisor to help you plan for these distributions and the effects they may have on your finances.

Why are RMDs required?

The IRS mandates that individuals begin taking annual distributions from tax-advantaged retirement accounts like traditional IRAs and 401(k) accounts to avoid deferring taxes on these assets indefinitely.

How do I know when to start taking RMDs?

RMD Timeline Example

Take a look at the following example for Susan, whose date of birth is July 1, 1947:

Susan's 70th Birthday

July 1, 2017

Susan turns 70½

January 1, 2018

First RMD is due

April 1, 2019

Second RMD is due

December 31, 2019

In general, you must take your first RMD no later than April 1st of the year following the calendar year you turn age 70½. Once RMDs begin, they generally can't be stopped and must be taken every year from each of your qualified retirement plan accounts. These are general guidelines and terms may vary, particularly for employer-sponsored retirement plans. It's important to review the plan's highlights or most recent Summary Plan Description to understand how RMDs are handled in your employer's plan.

What if I'm still working at 70½?

You are still required to take RMDs from your traditional IRAs once you reach 70½, regardless of your work status. However, you can generally delay taking the distribution from your current employer's retirement plan if you don't own 5% or more of that company. For more information about taking RMDs from your employer-sponsored retirement plan if you're still working, review your plan's highlights or the most recent Summary Plan Description.

How is the RMD amount calculated?

An RMD from a defined contribution plan, such as a 401(k) account, is calculated by taking the total value of the account balance on December 31 of the prior year and dividing it by the applicable life expectancy factor, which can be found in IRS Publication 590 at

You must calculate an RMD for each different account type—for the balance of each of your 401(k) accounts or other qualified retirement plans with former employers, (and current, if you are a 5% or greater owner of the employer), and for all of your traditional IRAs.

I have several old 401(k) accounts from previous employers and/or multiple IRA accounts—what should I do?

If you have multiple traditional IRAs, you calculate your RMD based on the total of all of them and you may take proportionately from one, all or any combination of your accounts.

With 401(k) accounts and other employer-sponsored plans, you must calculate and satisfy your RMDs separately for each one.

What happens if I don't take the RMD at all, or if I don’t take the correct minimum amount?

Failure to take any portion of a required minimum distribution can result in the imposition of an additional federal tax equal to 50% of the difference between the amount that was required to be distributed and the amount that was actually distributed.

I am approaching 70½—what should I do if I have more questions about RMDs?

Your employer's Benefits department, or the financial institution that administers the plan or account, should be able to assist you with when and how to start taking RMDs.


Taxes on withdrawals from tax-qualified retirement accounts would depend on the type of account (e.g., 401(k), IRA, Roth IRA). For 401(k) accounts, taxes would depend on the type(s) of contributions you made to your account(s). You should consult your personal tax advisor.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.


B965BD35 (SCD*******803)