Required Minimum Distributions Explained

Required Minimum Distributions Explained: What You Need to Know

If you have money saved in a traditional 401(k), traditional IRA, or similar tax-deferred retirement account, the IRS will eventually require you to start taking money out. These mandatory withdrawals are called Required Minimum Distributions, or RMDs. Understanding how they work is essential for retirement planning because they directly affect your taxes, your account balances, and your income strategy in retirement.

This guide breaks down everything you need to know about RMDs: when they start, how they are calculated, what happens if you miss one, and how they fit into a broader retirement plan.

What Are Required Minimum Distributions?

A Required Minimum Distribution is the smallest amount of money you must withdraw from certain retirement accounts each year once you reach a specific age. The IRS created RMDs because contributions to traditional retirement accounts were tax-deferred, meaning you did not pay income tax when the money went in. The government wants to collect that deferred tax eventually, so it requires you to take distributions and pay income tax on the withdrawals.

RMDs apply to the following types of accounts:

Traditional IRAs
Traditional 401(k) plans
403(b) plans
457(b) plans
SEP IRAs
SIMPLE IRAs
Inherited IRAs (with special rules)

One important exception: Roth IRAs do not have RMDs during the original account owner’s lifetime. Because Roth contributions are made with after-tax dollars, the IRS does not require you to withdraw them on a schedule. However, Roth 401(k) accounts were previously subject to RMDs, but starting in 2024, the SECURE 2.0 Act eliminated RMDs for Roth 401(k) accounts as well.

When Do RMDs Begin?

The age at which you must start taking RMDs has changed several times in recent years due to legislation. Here is the current timeline based on your birth year:

Born before July 1, 1949: RMDs began at age 70½
Born July 1, 1949 through 1950: RMDs began at age 72
Born 1951 through 1959: RMDs begin at age 73
Born 1960 or later: RMDs begin at age 75

These changes were introduced by the SECURE Act of 2019 and the SECURE 2.0 Act of 2022. The shift to age 75 for those born in 1960 or later gives younger workers additional years of tax-deferred growth before withdrawals are required.

Your first RMD must be taken by April 1 of the year following the year you reach the applicable age. After that first year, all subsequent RMDs must be taken by December 31 of each year.

Here is a practical example. If you were born in 1955 and turn 73 in 2028, your first RMD would be due by April 1, 2029. Your second RMD would then be due by December 31, 2029. This means you could end up taking two RMDs in a single calendar year, which could push you into a higher tax bracket. Many retirees choose to take their first RMD in the year they turn 73 rather than delaying to April 1 of the following year for this reason.

The Still-Working Exception

If you are still employed and participating in your current employer’s 401(k), 403(b), or other workplace retirement plan, you may be able to delay RMDs from that specific plan until you actually retire. This is sometimes called the “still-working exception.” However, this exception does not apply to IRAs, previous employer plans, or accounts where you own more than 5% of the business. It only applies to the plan at your current employer.

How RMDs Are Calculated

The IRS provides a formula for calculating your RMD each year. The basic calculation is straightforward:

RMD = Account Balance (as of December 31 of the prior year) ÷ Life Expectancy Factor

The life expectancy factor comes from IRS Uniform Lifetime Table (Table III in IRS Publication 590-B). The IRS updated these tables in 2022, resulting in slightly lower RMDs for most people compared to the older tables.

Here are some sample life expectancy factors from the current Uniform Lifetime Table:

Age 73: 26.5
Age 75: 24.6
Age 80: 20.2
Age 85: 16.0
Age 90: 12.2
Age 95: 8.9

Worked Example: Calculating an RMD at Age 73

Let’s say Maria turns 73 in 2028. On December 31, 2027, her traditional IRA balance was $500,000. Using the Uniform Lifetime Table, her life expectancy factor at age 73 is 26.5.

Her RMD for 2028 would be: $500,000 ÷ 26.5 = $18,868 (approximately)

Maria must withdraw at least $18,868 from her traditional IRA during 2028 (or by April 1, 2029, if this is her first RMD year). She can always withdraw more than this amount, but she cannot withdraw less without facing penalties.

Worked Example: How RMDs Grow Over Time

As you age, the life expectancy factor gets smaller, which means the percentage of your account you must withdraw increases. Consider the same $500,000 balance at different ages (assuming the balance stays constant for illustration purposes):

Age 73: $500,000 ÷ 26.5 = $18,868 (about 3.8% of the balance)
Age 80: $500,000 ÷ 20.2 = $24,752 (about 5.0% of the balance)
Age 85: $500,000 ÷ 16.0 = $31,250 (about 6.3% of the balance)
Age 90: $500,000 ÷ 12.2 = $40,984 (about 8.2% of the balance)

In practice, account balances fluctuate based on investment performance and withdrawals, so the actual dollar amounts will vary each year. But the key takeaway is that the required percentage increases as you get older.

Special Rule for Spouses

If your sole beneficiary is a spouse who is more than 10 years younger than you, you can use the Joint Life and Last Survivor Expectancy Table (Table II) instead of the Uniform Lifetime Table. This results in a larger divisor and a smaller RMD, which can provide a tax advantage.

What Happens If You Miss an RMD?

Missing an RMD or withdrawing less than the required amount triggers a penalty. Under the SECURE 2.0 Act, the penalty for failing to take an RMD was reduced from 50% to 25% of the shortfall. If you correct the error in a timely manner (generally by the end of the second year following the year of the missed distribution), the penalty is further reduced to 10%.

For example, if your RMD was $20,000 and you only withdrew $5,000, the shortfall is $15,000. The 25% penalty would be $3,750. If corrected promptly, the 10% penalty would be $1,500. Either way, this is a costly mistake that is worth avoiding.

To correct a missed RMD, you generally need to withdraw the shortfall amount as soon as possible and file IRS Form 5329 with your tax return. Some taxpayers also include a letter of explanation requesting a penalty waiver if the error was due to reasonable cause.

Tax Implications of RMDs

RMDs from traditional retirement accounts are taxed as ordinary income in the year they are received. This means they are added to your other income (Social Security benefits, pensions, part-time work, investment income) and taxed at your marginal federal income tax rate.

This has several important implications:

Higher tax bracket: Large RMDs can push your total income into a higher federal tax bracket.
Social Security taxation: RMD income counts toward the income thresholds that determine how much of your Social Security benefit is taxable. For individuals with combined income above $34,000 (or $44,000 for married couples filing jointly), up to 85% of Social Security benefits may be subject to tax.
Medicare surcharges: Higher income from RMDs can trigger Income-Related Monthly Adjustment Amounts (IRMAA), which increase your Medicare Part B and Part D premiums. For 2025, these surcharges begin when modified adjusted gross income exceeds $106,000 for individuals or $212,000 for married couples filing jointly.
State taxes: Most states also tax RMDs as income, though a few states do not have an income tax or provide exemptions for retirement income.

Strategies Some Retirees Consider

There are several approaches that some retirees explore to manage the impact of RMDs. Each comes with trade-offs, and what works for one person may not work for another.

Roth Conversions Before RMDs Begin

Some retirees convert portions of their traditional IRA to a Roth IRA during the years between retirement and the start of RMDs. This involves paying income tax on the converted amount now, but the money then grows tax-free in the Roth and is not subject to future RMDs.

The trade-off: you pay taxes upfront, and if your tax rate in retirement turns out to be lower than expected, the conversion may not provide a net benefit. Large conversions in a single year can also push you into higher tax brackets or trigger IRMAA surcharges. Careful planning with a tax professional is important.

Qualified Charitable Distributions (QCDs)

If you are age 70½ or older, you can direct up to $105,000 per year (as of 2024, with this amount indexed for inflation) from your IRA directly to a qualified charity. This is called a Qualified Charitable Distribution. The amount counts toward satisfying your RMD but is excluded from your taxable income.

The trade-off: you are giving away money that you could otherwise spend. QCDs only make sense if you were already planning to make charitable donations and you do not need the full RMD amount for living expenses. QCDs are also not available from 401(k) accounts. You would need to roll the funds into an IRA first.

Delaying vs. Taking the First RMD Early

As mentioned earlier, you can delay your first RMD to April 1 of the year after you reach the required age. But this means taking two RMDs in one year.

The trade-off: delaying gives your account more time to grow tax-deferred, but doubling up on distributions in a single year could increase your tax bill significantly. Some retirees find it beneficial to take the first RMD in the year they reach the required age to spread out the tax impact.

RMDs and Inherited Accounts

If you inherit a retirement account, different RMD rules may apply depending on your relationship to the original account owner and when the account owner passed away.

Under the SECURE Act, most non-spouse beneficiaries who inherit accounts from someone who died on or after January 1, 2020, must withdraw the entire balance within 10 years. The IRS has also proposed rules requiring annual distributions within that 10-year window if the original owner had already begun taking RMDs.

Surviving spouses have more flexibility. They can roll the inherited account into their own IRA, treat it as their own, and follow standard RMD rules based on their own age. They can also choose to remain as a beneficiary of the inherited account, which may be advantageous in certain situations.

Other exceptions to the 10-year rule include minor children of the original account owner (until they reach the age of majority), disabled or chronically ill individuals, and beneficiaries who are not more than 10 years younger than the deceased.

How RMDs Fit into Retirement Income Planning

For context on retirement income, the average Social Security retirement benefit is approximately $1,976 per month as of early 2025, according to the Social Security Administration. For many retirees, RMDs from retirement accounts represent a significant portion of their total income beyond Social Security.

Consider this scenario. If you contribute $500 per month to a 401(k) starting at age 30, earning an average annual return of 7%, you would accumulate approximately $829,000 by age 65. By the time you reach age 73, assuming continued growth and some withdrawals, your balance could still be substantial. An RMD on an $800,000 balance at age 73 would be approximately $30,189 ($800,000 ÷ 26.5), or about $2,516 per month before taxes.

Combined with Social Security, this could provide meaningful retirement income. But the taxes on that income need to be planned for carefully. The 2026 401(k) employee contribution limit is $23,500 ($31,000 for those age 50 and older, with an additional catch-up provision of $34,750 for those ages 60 through 63). Maximizing contributions during your working years can build a larger nest egg, but it also means larger future RMDs.

This is one reason some financial planners discuss the balance between traditional and Roth contributions during your working years. There is no single right answer, as the best approach depends on your current tax rate, expected future tax rate, time horizon, and personal circumstances.

Common Mistakes to Avoid

Forgetting to take your RMD: Set calendar reminders or arrange automatic distributions with your account custodian.
Not aggregating IRA accounts correctly: If you have multiple IRAs, you calculate the RMD for each separately but can take the total amount from one or more of them. This rule does not apply across different account types (e.g., you cannot satisfy a 401(k) RMD by withdrawing from an IRA).
Ignoring the tax impact: Plan ahead for the income tax owed on RMDs. Consider estimated tax payments or withholding.
Confusing Roth IRA and Roth 401(k) rules: As of 2024, Roth 401(k) accounts no longer require RMDs. Roth IRAs have never required them during the original owner’s lifetime.
Not updating beneficiary designations: Inherited account RMD rules depend heavily on who inherits the account. Keep your beneficiary forms current.

Key Takeaways

RMDs are mandatory annual withdrawals from most tax-deferred retirement accounts, beginning at age 73 or 75 depending on your birth year.
The amount is calculated by dividing your prior year-end account balance by an IRS life expectancy factor.
Missing an RMD triggers a penalty of 25% of the shortfall (reduced to 10% if corrected promptly).
RMDs are taxed as ordinary income and can affect your tax bracket, Social Security taxation, and Medicare premiums.
Roth IRAs and (starting in 2024) Roth 401(k) accounts are not subject to RMDs during the original owner’s lifetime.
Inherited accounts have their own set of RMD rules, which changed significantly under the SECURE Act.

This article was created with the assistance of AI and reviewed for accuracy.

Data Sources

Disclaimer: RetireGrader is not a financial advisor or fiduciary. This content is for educational purposes only. Consult a qualified financial advisor before making decisions about your retirement accounts, tax strategy, or required minimum distributions. Tax laws and regulations change frequently. The information in this article reflects rules current as of early 2025.