Why this is correct (Q7 — RMD = scheduled minimum withdrawal from tax-deferred accounts): Required Minimum Distributions (RMDs) are rules that mandate minimum annual withdrawals from certain tax-deferred retirement accounts once you reach a specified age. The fundamental policy intent is to ensure that tax deferral is temporary in practice: contributions and earnings received preferential tax treatment while accumulating, but taxes are eventually collected when distributions are required. RMDs apply to many pre-tax accounts and are calculated with formulas that consider account balances and life expectancy factors. Failing to take the required amount can result in steep excise taxes.

Practical takeaway & planning notes: Knowing about RMDs helps you plan tax-efficient distributions and decide how much to hold in Roth vs. pre-tax accounts. For instance, Roth IRAs (in many common cases) are not subject to RMDs during the original owner’s lifetime, which can be attractive for estate or tax-planning reasons. If you anticipate sizable pre-tax balances, consider how RMDs will affect taxable income and Medicare premiums in retirement. Always check current legal ages and calculation rules because they change over time; use plan statements and IRS guidance or a professional for exact RMD calculations.