Required Minimum Distribution
A Required Minimum Distribution (RMD) is the minimum amount you must withdraw each year from certain retirement accounts once you reach age 73. The IRS calculates this amount using your account balance and life expectancy tables. Starting in 2023, the age increased from 72 to 73 under the SECURE 2.0 Act.
How RMDs Affect Your Benefits
RMDs matter directly for government assistance eligibility because the withdrawn amount counts as income. This affects your qualification for need-based programs including SNAP, Medicaid, TANF, and WIC.
- SNAP: RMD withdrawals count toward your gross monthly income. For a single person, the income limit is typically 130% of the federal poverty line (about $1,810 per month in 2024). An RMD of $500 per month could disqualify you from SNAP if your other income is near the threshold.
- Medicaid: State programs vary, but most count RMD income when determining financial eligibility. Some states use 138% of the federal poverty line; others use different percentages. Check your state's specific rules.
- TANF: Temporary Assistance for Needy Families includes RMD income in the countable income calculation. Most states have monthly limits around $500 to $1,000 depending on household size.
- WIC: Women, Infants, and Children programs typically use income limits at 185% of the federal poverty line. RMDs factor into this calculation.
Calculating Your RMD
The IRS uses a simple formula: divide your retirement account balance on December 31 of the prior year by a life expectancy factor from IRS Publication 590-B. For someone age 73, the factor is 26.5, meaning you divide your account balance by 26.5 to get your annual RMD. You can take this in monthly installments. If you have multiple IRAs, you calculate the RMD for each separately but can withdraw the total from any one account.
Penalties for Missing RMDs
If you don't take your full RMD by December 31 each year, the IRS charges a penalty of 10% of the amount you failed to withdraw (reduced from 25% under recent changes). For example, if your RMD is $1,000 and you withdraw nothing, you owe a $100 penalty. This penalty applies regardless of your income level or benefits status.
Common Questions
- Can I delay my RMD to protect my benefits? No. Once you reach age 73, you must take your RMD each year. The only exception is if you're still working and your employer plan allows the "still-working exception." This doesn't apply to IRAs. Missing the deadline costs you 10% of the withdrawal amount in penalties.
- Does my RMD count as income for all programs? Yes, RMDs count as unearned income for SNAP, Medicaid, TANF, and WIC. Some state programs may have additional rules, so contact your local benefits office to confirm how your specific RMD affects your case.
- What if I inherited a retirement account? Inherited IRA withdrawals follow different rules depending on when you inherited and who left it to you. Consult your benefits caseworker before the inheritance is finalized, as it may trigger a 10-year withdrawal period that creates substantial annual income.