If you do not make a required minimum distribution (RMD) from your own or an inherited IRA by the specified deadline, the IRS could hit you with a big penalty - 50%! For example, if you were required to withdraw a minimum of $4,000 and you did not, you would be obliged to pay $2,000. Plus, beginning January 1, 2020, the rules concerning RMDs were updated.

In case you're like most investors, you're probably trying to build a financial portfolio that is solid enough to guarantee a comfortable retirement. Among retirement financial planners, this is known as the "accumulation phase." In this stage, your objective is to carefully invest by selecting stocks with long-term potential for your retirement nest egg. For example, you might choose Apartment Investment Management (AIV Quick QuoteAIV - Free Report) , which is a current top ranked dividend stock.

There is also a second phase of retirement planning that gets less focus - despite the fact that it's the more interesting part. It's the "distribution phase," which essentially means spending the wealth you've worked hard to amass.

Making plans for the distribution stage involves deciding where you'll live in retirement, whether you'll travel, your proposed leisure activities, and more decisions that will affect your spending during your golden years.

Along with those choices, you need to be mindful of the RMD, because it applies to the majority of retirement accounts. This IRS rule requires you to withdraw a specific minimum amount from any qualified accounts you have when you reach a certain age--previously it was 70 1/2, but beginning in 2020, it is 72.

Why does the IRS require these distributions? It's straightforward - they need to ensure they get their tax. In the event that this standard didn't exist, individuals could live off other pay and never pay tax on their retirement investment returns. So, that cash could be left to family or companions as an inheritance without the IRS getting any taxes from you.

What You Need to Know About RMDs

Which types of accounts have RMDs? Qualified retirement accounts such as IRAs, 401(k)s, 457 plans, and other tax-deferred retirement savings plans like a TSP, 403(b), TSA, SEP, or SIMPLE IRA plan require withdrawals in retirement.

When do I have to start taking distributions? For most accounts, you must take your first distribution by April 1 of the year following the calendar year in which you reach age 72. If you retire after that age, you must take your first RMD from your 401(k), profit-sharing, 403(b), or other defined contribution plan by April 1 of the year following the calendar year in which you retire.

For each subsequent year after your required beginning date, you must take your RMD by December 31. Note that you do not have to take an RMD on a Roth IRA since you paid taxes prior to contributing. Other types of Roth accounts require RMDs. However, there are ways to avoid them. For example, you can roll your Roth 401(k) into your Roth IRA.

What happens if don't take my RMD? The penalty for not taking a required minimum distribution, or if the distribution is not large enough, is a 50% tax on the amount not withdrawn in time.

How much money do I have to withdraw? To calculate a specific RMD, you must divide your prior year's December 31st retirement account balance by a "distribution period" factor based on your age.

Here's an example to give you an idea of the amount: Ann is 71 and will take her first RMD in the year following the year she turns 72. Her IRA balance at the end of the prior year was $100,000. Her "distribution period" factor is 27.4. Dividing $100,000 by 27.4 equals $3,649.63. This is how much Ann is required to withdraw for her first RMD.

Learning about the "distribution phase" is just one aspect of preparing for your nest egg years.

To learn more about the tax implications of retirement spending - and much more about retirement planning - download our free guide: Retirement Made Easy.