What Are Required Minimum Distributions?
Required Minimum Distributions (RMDs) are mandatory annual withdrawals that the IRS requires you to take from tax-deferred retirement accounts once you reach a certain age. The government provided tax-deferred growth as an incentive for retirement saving, but it also wants to eventually collect income tax on that money. RMDs ensure that retirement accounts are not used solely as tax-free wealth transfer vehicles and that the deferred taxes are eventually paid during the account holder's lifetime or shortly after.
RMDs apply to Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, 457(b) plans, and other employer-sponsored defined contribution plans. The one major exception is the Roth IRA, which is not subject to RMDs during the original account holder's lifetime. This makes Roth IRAs uniquely valuable for those who do not need the money in retirement and want to leave a tax-free inheritance.
Failing to take the full required distribution results in a steep penalty. Under current rules, the penalty for an insufficient RMD is 25% of the shortfall amount, reduced from the previous 50% penalty by the SECURE 2.0 Act. If corrected within two years, the penalty drops further to 10%. Despite this reduction, it remains one of the harshest penalties in the tax code, making it essential to understand and comply with RMD rules.
When Do RMDs Begin?
The age at which you must begin taking RMDs has changed multiple times in recent years due to new legislation. Under current law following the SECURE Act and SECURE 2.0 Act, the RMD beginning age depends on your birth year.
| Birth Year | RMD Beginning Age | Applicable Law |
|---|---|---|
| 1950 or earlier | 70 1/2 | Pre-SECURE Act rules |
| 1951 - 1959 | 73 | SECURE 2.0 Act |
| 1960 or later | 75 | SECURE 2.0 Act (effective 2033) |
Your first RMD must be taken by April 1 of the year following the year you reach your RMD age. This deadline is called the Required Beginning Date (RBD). All subsequent RMDs must be taken by December 31 of each year. If you delay your first RMD to April 1, you will still need to take your second RMD by December 31 of that same year, resulting in two taxable distributions in one year. This can push you into a higher tax bracket, so many financial educators recommend taking the first RMD in the year you reach the qualifying age rather than delaying.
The Still-Working Exception
If you are still employed and do not own more than 5% of the company, you may be able to delay RMDs from your current employer's 401(k) or 403(b) plan until you actually retire. This exception applies only to the plan of the employer where you are currently working, not to IRAs or plans from previous employers. Once you separate from service, RMDs must begin by April 1 of the following year. This exception does not apply to Traditional IRAs, which require RMDs regardless of employment status.
How RMDs Are Calculated
The RMD calculation is based on two factors: your retirement account balance as of December 31 of the previous year and a life expectancy factor from IRS tables. The formula is straightforward: divide the prior year-end account balance by the applicable life expectancy factor.
RMD = Account Balance (Dec 31 of prior year) / Life Expectancy Factor
The IRS provides three life expectancy tables. Most account holders use the Uniform Lifetime Table, which assumes a beneficiary 10 years younger than the account holder regardless of actual beneficiary age. A second table, the Joint Life and Last Survivor Table, applies when the sole beneficiary is a spouse who is more than 10 years younger than the account holder, resulting in a smaller RMD. The third table applies to inherited IRA beneficiaries.
RMD Calculation Example
Suppose you turned 75 in 2026 and your Traditional IRA balance on December 31, 2025, was $500,000. Using the Uniform Lifetime Table, the distribution period for age 75 is 24.6 years. Your RMD would be $500,000 divided by 24.6, which equals $20,325. You must withdraw at least $20,325 from your Traditional IRA during 2026 and pay ordinary income tax on that amount. You can always withdraw more than the minimum, but you cannot withdraw less without incurring the penalty.
| Age | Distribution Period (Uniform Lifetime Table) | RMD on $500,000 Balance | Approximate RMD % |
|---|---|---|---|
| 73 | 26.5 | $18,868 | ~3.8% |
| 75 | 24.6 | $20,325 | ~4.1% |
| 80 | 20.2 | $24,752 | ~5.0% |
| 85 | 16.0 | $31,250 | ~6.3% |
| 90 | 12.2 | $40,984 | ~8.2% |
| 95 | 8.9 | $56,180 | ~11.2% |
As the table shows, the distribution period decreases as you age, meaning the RMD percentage increases each year. At age 73, you must withdraw approximately 3.8% of your balance. By age 90, the percentage climbs to over 8%. This increasing percentage ensures that the account is gradually drawn down during the account holder's lifetime, though the actual balance may still grow if investment returns exceed the withdrawal rate in a given year.
The SECURE Act and SECURE 2.0 Act Changes
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 and the SECURE 2.0 Act of 2022 made several significant changes to RMD rules that benefit retirees.
Key SECURE Act Changes
- Raised the RMD age from 70 1/2 to 72: This gave retirees an additional 18 months before mandatory withdrawals began.
- Eliminated the stretch IRA for most beneficiaries: Non-spouse beneficiaries must now empty inherited retirement accounts within 10 years, with limited exceptions for eligible designated beneficiaries.
- Allowed contributions to Traditional IRAs after age 70 1/2: Previously, contributions were not allowed past this age.
Key SECURE 2.0 Act Changes
- Further raised the RMD age to 73 (2023) and 75 (2033): This provides even more years of tax-deferred growth.
- Reduced the penalty for missed RMDs from 50% to 25%: And further to 10% if corrected within two years.
- Eliminated RMDs from Roth 401(k) accounts: Starting in 2024, Roth 401(k) accounts no longer require RMDs, aligning them with Roth IRAs.
- Increased the QCD limit with inflation indexing: Qualified Charitable Distributions are now indexed to inflation.
Strategies to Minimize the Tax Impact of RMDs
Because RMDs are taxed as ordinary income, they can significantly increase your tax bill in retirement. Several strategies can help manage and reduce the tax impact of required distributions.
Roth Conversions Before RMD Age
Roth conversions during the years between retirement and the start of RMDs (often called the Roth conversion window) are widely discussed as one of the most effective strategies for reducing future RMDs. By converting Traditional IRA or 401(k) money to a Roth IRA, you pay income tax on the converted amount now at your current rate, but the money then grows tax-free in the Roth and is not subject to future RMDs.
The ideal scenario for Roth conversions is when you have low-income years between retirement and the start of Social Security or RMDs. During these years, your tax bracket may be unusually low, making it an optimal time to convert pre-tax money to Roth at a reduced tax cost. Converting enough to fill up low tax brackets each year without pushing into higher brackets is a common approach discussed by financial educators.
Qualified Charitable Distributions (QCDs)
A Qualified Charitable Distribution (QCD) allows individuals age 70 1/2 and older to donate up to $105,000 per year (2024 limit, indexed for inflation) directly from their IRA to a qualified charity. The QCD counts toward satisfying the RMD but is excluded from taxable income. This makes it a highly tax-efficient way to support charitable causes while managing your tax burden.
For charitably inclined retirees, QCDs offer a significant advantage over taking the RMD and then making a separate charitable donation. With a QCD, the distribution never appears on your tax return as income, which can reduce your adjusted gross income. A lower AGI can reduce Medicare premiums (which are income-based), decrease the taxable portion of Social Security benefits, and reduce or eliminate the net investment income tax.
Strategic Withdrawal Sequencing
Carefully planning which accounts to draw from in each year of retirement can minimize lifetime taxes. Financial educators discuss a withdrawal sequencing approach that considers drawing from taxable accounts first in early retirement (where gains may be taxed at lower capital gains rates), performing Roth conversions during low-income years, taking RMDs when required and using QCDs for charitable giving, and drawing from Roth accounts last to maximize the benefit of tax-free growth.
Aggregating RMDs Across Multiple Accounts
If you have multiple Traditional IRAs, you must calculate the RMD for each account separately, but you can take the total required amount from any one or combination of your IRAs. This flexibility allows you to choose which account to withdraw from based on investment considerations or which account you want to reduce. However, this aggregation rule applies only among IRAs. RMDs for 401(k)s and other employer plans must be taken separately from each plan.
RMDs for Inherited Retirement Accounts
The rules for inherited retirement accounts changed dramatically under the SECURE Act. Prior to 2020, non-spouse beneficiaries could stretch inherited IRA distributions over their own life expectancy, potentially spanning decades. The SECURE Act replaced this stretch provision with a 10-year rule for most non-spouse beneficiaries.
Spouse Beneficiaries
A surviving spouse has the most flexibility with an inherited retirement account. Options include treating the inherited IRA as their own (rolling it into their own IRA), which resets the RMD schedule based on the surviving spouse's age. Alternatively, the surviving spouse can remain as a beneficiary, which may be advantageous if they are younger than 59 1/2 and need access to the funds without the early withdrawal penalty.
Non-Spouse Beneficiaries (10-Year Rule)
Most non-spouse beneficiaries who inherit retirement accounts after January 1, 2020, must fully distribute the account within 10 years of the original owner's death. The IRS has clarified that if the original owner had already begun RMDs, the beneficiary must take annual distributions during the 10-year period, not just empty the account by year 10. If the original owner died before their RMD start date, the beneficiary may be able to defer all distributions until the 10th year, though this concentrates the tax impact into a single year.
Eligible Designated Beneficiaries (Exceptions)
Certain beneficiaries are exempt from the 10-year rule and can still use the stretch IRA approach. These eligible designated beneficiaries include the surviving spouse, minor children of the account owner (until they reach the age of majority, then the 10-year rule applies), individuals who are disabled or chronically ill, and beneficiaries who are not more than 10 years younger than the deceased account owner.
RMD Penalty and How to Avoid It
Failing to take the full RMD by the deadline results in a penalty tax. Under current rules, the penalty is 25% of the shortfall (the difference between the required amount and the amount actually withdrawn). If the shortfall is corrected within two years by taking the missed distribution and filing an amended return or corrective distribution, the penalty drops to 10%.
To avoid RMD penalties, consider these practical steps. Set up automatic RMD distributions through your brokerage or custodian, which most major firms offer. Mark your calendar with the December 31 deadline each year and review your accounts in November to confirm the distribution will be taken. If you have multiple IRAs or retirement plans, confirm the RMD has been calculated for each and taken from the appropriate accounts. Keep records of your annual RMD calculations, account balances, and distribution confirmations in case of IRS inquiry.
RMDs and Social Security Coordination
RMDs can interact with Social Security benefits in ways that increase your overall tax burden if not managed carefully. Up to 85% of Social Security benefits become taxable once your combined income (adjusted gross income plus non-taxable interest plus half of Social Security benefits) exceeds certain thresholds. RMDs count as ordinary income and can push your combined income above these thresholds, causing more of your Social Security to be taxed.
This creates a compounding effect. Large RMDs increase your taxable income, which can make more of your Social Security taxable, which further increases your taxable income. For retirees with substantial pre-tax retirement account balances, this interaction can result in an effective marginal tax rate that is higher than expected. This is another reason why Roth conversions before RMDs begin can be valuable: money in Roth accounts does not count as income and does not trigger additional taxation of Social Security benefits.
Planning Ahead: RMD Projection
Projecting your future RMDs helps you plan for the tax impact and develop appropriate strategies. Financial educators suggest creating an RMD projection that estimates your Traditional IRA and 401(k) balances at your RMD start age based on current balances, expected contributions, and assumed growth rates. Then calculate the expected annual RMD using the Uniform Lifetime Table and project the income tax impact based on your expected tax bracket in retirement.
This projection can reveal whether Roth conversions, charitable giving strategies, or changes to your current savings approach could meaningfully reduce your future RMD tax burden. Many retirees are surprised to discover that their RMDs will be significantly larger than they anticipated, especially if their retirement accounts have grown substantially during the decades of tax-deferred compounding. Planning ahead allows you to implement strategies while you still have time to make a meaningful difference.
