Minimum Required Distribution (MRD)

The Internal Revenue Code established these minimums to ensure that you actually use your Employer Sponsored Retirement Plan account balance for retirement (and not, for instance, to pass onto your heirs). Unless an earlier date is specified by your plan, you must take your first withdrawal (MRD) from your account by April 1 of the year following the year in which you reach age 70 1/2, or April 1 of the year following the year in which you retire, whichever is later. However, if you are a five percent owner of your employer, you must begin taking MRDs by April 1 following the year you reach age 70 1/2.

If you defer your first MRD payment until April 1, you must take your second MRD payment by December 31 of that same year. In each subsequent year, the minimum required distribution must be made on or before December 31. If you do not take an MRD from your retirement account each year, the Internal Revenue Code imposes a 50% penalty tax on the amount that should have been withdrawn in each calendar year. This tax is in addition to regular income taxes.