You've spent decades saving in tax-advantaged retirement accounts. Now, the IRS wants its share. Required Minimum Distributions (RMDs) are mandatory withdrawals you must take from most retirement accounts starting at age 73. Miss them, and you'll face steep penalties.
Understanding RMD rules helps you plan withdrawals strategically, minimize taxes, and avoid costly mistakes.
What Are RMDs?
Required Minimum Distributions are the minimum amounts you must withdraw annually from certain retirement accounts once you reach a specific age. The IRS requires these withdrawals because they've been deferring taxes on your retirement savings—and now it's time to collect.
The Basic Rules
| Rule | Details |
|---|---|
| Starting age | 73 (for those born 1951-1959); 75 (for those born 1960+) |
| First RMD deadline | April 1 of the year after you turn 73 |
| Subsequent deadlines | December 31 each year |
| Calculation basis | Account balance on December 31 of prior year |
| Penalty for missing | 25% of amount not withdrawn (10% if corrected promptly) |
Which Accounts Have RMDs?
| Account Type | RMDs Required? |
|---|---|
| Traditional IRA | Yes, at 73 |
| SEP IRA | Yes, at 73 |
| SIMPLE IRA | Yes, at 73 |
| Traditional 401(k) | Yes, at 73 (or retirement, if later) |
| Traditional 403(b) | Yes, at 73 (or retirement, if later) |
| Traditional 457(b) | Yes, at 73 (or retirement, if later) |
| Roth 401(k) | Yes, but can avoid by rolling to Roth IRA |
| Roth IRA | No (during owner's lifetime) |
đź’ˇ Pro Tip: Roth IRAs are the only retirement account that never requires RMDs during the owner's lifetime. This makes them excellent for estate planning and tax flexibility.
When RMDs Begin
The Age 73 Rule
For most people born between 1951 and 1959, RMDs begin at age 73. The SECURE 2.0 Act changed this timeline:
| Birth Year | RMD Starting Age |
|---|---|
| 1950 or earlier | 72 |
| 1951-1959 | 73 |
| 1960 or later | 75 |
Still Working Exception (401(k) Only)
If you're still working at age 73 and don't own more than 5% of the company, you can delay RMDs from your current employer's 401(k) until you retire.
This exception does NOT apply to:
- IRAs (RMDs required regardless of work status)
- Old 401(k)s from previous employers
- 5%+ owners of the business
Your First RMD: Special Timing
Your first RMD has an extended deadline: April 1 of the year after you turn 73.
But be careful: If you wait until April 1 for your first RMD, you'll have to take two RMDs in that calendar year (one by April 1, one by December 31), potentially pushing you into a higher tax bracket.
| Strategy | Tax Impact |
|---|---|
| Take first RMD in year you turn 73 | One RMD per year |
| Wait until April 1 of following year | Two RMDs in one year = higher taxes |
đź“Ś Key Takeaway: Most people should take their first RMD in the year they turn 73, not wait until April 1 of the following year.
How to Calculate Your RMD
The Formula
RMD = Account Balance (Dec 31 of prior year) Ă· Life Expectancy Factor
Life Expectancy Tables
The IRS provides life expectancy factors in Publication 590-B. The most commonly used table is the Uniform Lifetime Table:
| Age | Distribution Period (Factor) |
|---|---|
| 73 | 26.5 |
| 74 | 25.5 |
| 75 | 24.6 |
| 76 | 23.7 |
| 77 | 22.9 |
| 78 | 22.0 |
| 79 | 21.1 |
| 80 | 20.2 |
| 85 | 16.0 |
| 90 | 12.2 |
| 95 | 8.9 |
Calculation Example
Maria, age 75:
- IRA balance (Dec 31 of prior year): $500,000
- Life expectancy factor (age 75): 24.6
- RMD: $500,000 Ă· 24.6 = $20,325
Special Rule: Much Younger Spouse
If your sole beneficiary is a spouse more than 10 years younger, you use a different table (Joint Life and Last Survivor) that results in smaller RMDs.
Managing Multiple Accounts
IRA Aggregation Rule
If you have multiple IRAs, you can:
- Calculate the RMD for each account separately
- Add them together for your total IRA RMD
- Withdraw the total from any one or combination of your IRAs
Example:
- IRA #1 RMD: $10,000
- IRA #2 RMD: $8,000
- Total IRA RMD: $18,000
- You can take all $18,000 from IRA #1 if you prefer
401(k) Separate Treatment
401(k) accounts cannot be aggregated with IRAs. Each 401(k) RMD must be taken from that specific account.
| Account Type | Can Aggregate? |
|---|---|
| Multiple IRAs | Yes—calculate separately, withdraw from any |
| Multiple 401(k)s | No—each must be taken separately |
| IRA + 401(k) | No—cannot aggregate different account types |
RMD Tax Implications
How RMDs Are Taxed
RMDs from traditional accounts are taxed as ordinary income at your marginal tax rate.
| RMD Amount | Approximate Federal Tax (Single, 2025) |
|---|---|
| $10,000 | ~$1,000-$1,200 |
| $25,000 | ~$2,500-$5,500 |
| $50,000 | ~$5,500-$11,000 |
| $100,000 | ~$15,000-$24,000 |
Tax Planning Strategies
1. Roth Conversions Before RMDs
Convert traditional IRA funds to Roth before age 73 to:
- Reduce future RMDs
- Lock in potentially lower tax rates
- Create tax-free income later
2. Qualified Charitable Distributions (QCDs)
If you're 70½ or older, you can donate up to $105,000 (2025) directly from your IRA to charity. Benefits:
- Counts toward your RMD
- Doesn't count as taxable income
- Better than deducting charitable donations for most people
3. Strategic Withdrawal Timing
Take RMDs in years with lower income if possible. Consider:
- Large deductions or losses
- Lower-income years (early retirement, between jobs)
- Years before Social Security begins
đź’ˇ Pro Tip: Qualified Charitable Distributions (QCDs) are one of the best tax strategies available. Even if you don't itemize deductions, QCDs reduce your taxable income dollar-for-dollar.
RMD Deadlines and Penalties
Key Deadlines
| Deadline | What's Due |
|---|---|
| December 31 | Annual RMD for current year |
| April 1 (first year only) | First RMD can be delayed until this date |
Penalty for Missing RMDs
The penalty for failing to take your full RMD is steep:
| Situation | Penalty |
|---|---|
| Missed or insufficient RMD | 25% of the amount not withdrawn |
| Corrected within 2 years | Reduced to 10% |
Example:
- Required RMD: $20,000
- Amount withdrawn: $15,000
- Shortfall: $5,000
- Penalty: $1,250 (25%) or $500 (10% if corrected promptly)
How to Fix a Missed RMD
- Withdraw the missed amount immediately
- File Form 5329 with your tax return
- Request a penalty waiver (IRS often grants these for reasonable cause)
- Include a letter explaining why you missed the deadline
Strategies to Reduce RMDs
Strategy 1: Roth Conversions
Convert traditional IRA balances to Roth IRA before RMDs begin. You'll pay taxes now, but:
- Reduce future RMDs
- Create tax-free growth
- Leave tax-free inheritance
| Age | Strategy |
|---|---|
| Early 60s | Prime conversion years—may be in lower bracket |
| 65-72 | Last chance before RMDs start |
| 73+ | Can still convert, but must take RMD first |
Strategy 2: Qualified Charitable Distributions
If you give to charity anyway, QCDs are superior to regular donations:
| Method | Tax Benefit |
|---|---|
| Regular donation + itemizing | Deduction (if itemizing) |
| QCD | Exclusion from income (works even if not itemizing) |
Strategy 3: Use RMDs for Roth Conversions
Take your RMD (required), then convert additional traditional IRA funds to Roth using the remaining "tax space" in your bracket.
Strategy 4: Roll Roth 401(k) to Roth IRA
Roth 401(k)s are subject to RMDs, but Roth IRAs are not. Rolling over eliminates this requirement.
RMDs and Inherited Accounts
Rules Changed Significantly (SECURE Act)
| Beneficiary Type | RMD Rules |
|---|---|
| Spouse | Can roll to own IRA; RMDs based on own life expectancy |
| Eligible designated beneficiaries | Stretch over life expectancy |
| Other designated beneficiaries | 10-year rule—must empty by end of 10th year |
| Non-designated beneficiaries | 5-year rule |
Eligible designated beneficiaries include:
- Surviving spouses
- Minor children (until majority)
- Disabled or chronically ill individuals
- Beneficiaries not more than 10 years younger than deceased
The 10-Year Rule
Most non-spouse beneficiaries must withdraw all inherited IRA/401(k) funds within 10 years of the owner's death. No RMDs during the 10 years, but the entire balance must be withdrawn by the deadline.
Common RMD Mistakes
1. Missing the December 31 Deadline
Set calendar reminders or automate RMD withdrawals.
2. Forgetting Old 401(k)s
Every 401(k) from previous employers requires a separate RMD. Consolidate old accounts.
3. Taking RMD from Wrong Account Type
You can't take an IRA RMD from a 401(k) or vice versa.
4. Not Taking RMD Before Roth Conversion
You must take your RMD for the year before converting any additional funds to Roth.
5. Forgetting About Inherited Accounts
Inherited accounts have separate RMD requirements.
Your RMD Action Plan
-
Know your RMD age: 73 or 75, depending on birth year
-
Calculate your RMD: Use IRS tables or online calculators
-
Decide on timing: First-year RMD strategy is crucial
-
Consider QCDs: If you're charitably inclined, start at 70½
-
Explore Roth conversions: Reduce future RMDs while you can
-
Set reminders: Never miss the December 31 deadline
-
Consolidate accounts: Simplify RMD management
-
Plan for taxes: RMDs are fully taxable—budget accordingly
-
Review annually: Balances and life expectancy change each year
Required Minimum Distributions are a significant part of retirement planning. By understanding the rules and planning strategically, you can minimize taxes, avoid penalties, and make the most of your retirement savings.