why does the irs impose rmds 
an rmd acts as a safeguard against people using a retirement account to avoid paying taxes because traditional iras and non roth 401 k plans use pre tax dollars the irs imposes rmds to prevent individuals from avoiding paying the deferred tax liability owed on those contributions the bottom linethe rmd rule is in place to prevent individuals from avoiding the deferred tax liability owed on their retirement contributions still most people start withdrawing from their retirement accounts before they must start taking rmds because they need the money they live off their retirement funds rmds begin at age 73 and are calculated by dividing the retirement account s prior year end fair market value by a life expectancy factor published by the irs failure to take rmds as currently required results in a 25 penalty fortunately the irs publishes a worksheet that makes it very easy to calculate how much you must take out each year however other factors can be a bit tricky such as what to do with multiple iras and how rmds work when the retirement account holder passes away and the funds are inherited be sure to do your tax time research and stay abreast of what you need to do 