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The basics
This is a distribution you choose for the forecast, not a new tax exception or a legal minimum. The account pays on its own schedule before the normal gap-funding order is used. The money leaves the account, receives that account type’s normal tax and penalty treatment, and becomes available to the household’s annual cash flow.
Illustrative numbers
A distribution the household does not need to spend
Annual instruction$20,000 in today’s money
Accounttraditional IRA
Cash need before payout$5,000
The full scheduled gross amount leaves the IRA and is priced as ordinary income. The payment covers the $5,000 need; after tax, any remainder follows the plan’s normal cash-buffer and surplus-allocation settings.
Calculation transparency
How it works in MoneyWhatIf
- 01
The schedule can be a dollar amount or a percentage of the balance that remains when the annual payment is processed. A dollar amount can stay nominally flat or rise with plan inflation.
- 02
It can run for the whole plan or for one or more active periods. The annual engine does not choose monthly installments inside those plan years.
- 03
Required minimum distributions are processed first. For an RMD-eligible account, a required amount already taken from that same account counts toward the chosen schedule, so only the additional floor is distributed.
- 04
The gross payment is capped by what the account still holds, receives the account’s ordinary, gains, basis, state, and early-withdrawal treatment, and is recorded separately from a discretionary withdrawal used to close a later cash gap.
- 05
If the account also has a Rule 72(t) election, the model adds that election’s payment separately; one setting does not replace the other.
Keep in mind
Model limits
The setting is a forecasting instruction. It does not establish an annuity contract, custodian instruction, required minimum distribution, or exception to an early-distribution tax.
Payment dates, withholding elections, security or tax-lot selection, transaction fees, and custodian mechanics are outside the annual model.
A schedule can ask for more than the account can pay. The model caps the distribution at the remaining balance rather than promising the requested cash.
This explanation documents the planning model. It is educational, not individualized tax, legal, Medicare, or investment advice.
Where it appears
Where to use it
See this concept in context, with a guide to each page and its controls.
The words behind it
Related financial terms
Plain-English definitions, with 2026 figures and worked examples, from the financial terms glossary.