Qualified retirement plans, such as 401(k)’s and IRA’s have a terminology all their own. Any withdrawal from your account that you take after you reach age 59 ½ is called a Normal Distribution.
A Normal Distribution is not the same as a Required Minimum Distribution (RMD). From age 59 ½ to age 70 ½, you’re free to withdraw any amount you wish from your retirement account, including nothing at all. Beginning on April 1 in the year after you reach age 70 ½, though, your RMD kicks in.
A Required Minimum Distribution is the baseline amount you must withdraw from your traditional 401(k) or IRA each year after you reach age 70 ½. It differs each year and is determined by taking the balance of your account in any given year and dividing it by your life expectancy as calculated by the IRS. If you don’t take your RMD in any given year, you’ll pay a penalty of 50%.
If you have a Roth retirement plan, or if you have a traditional 401(k) and you’re still employed after you reach age 70 ½, then you do not have a Required Minimum Distribution.