Required Minimum Distributions (RMDs): Everything You Need to Know

After decades of tax-deferred growth in retirement accounts, the IRS eventually requires you to start taking money out. These mandatory withdrawals — called Required Minimum Distributions (RMDs) — prevent pre-tax retirement savings from accumulating tax-free indefinitely. Understanding when RMDs start, how they are calculated, the consequences of missing them, and the strategies available to manage their tax impact is essential for anyone approaching or in retirement.

Table of Contents

1. Which Accounts Require RMDs?
2. When Do RMDs Begin?
3. How to Calculate Your RMD
4. RMD Deadlines
5. Penalties for Missing RMDs
6. Strategies to Manage RMD Tax Impact
7. Qualified Charitable Distributions (QCDs)
8. Inherited IRA RMD Rules
9. SECURE 2.0 Changes

Which Accounts Require RMDs?

RMDs apply to virtually all pre-tax retirement accounts — accounts where contributions were made with before-tax dollars and growth has been tax-deferred:

• Traditional IRAs
• SEP-IRAs
• SIMPLE IRAs
• 401(k) plans (traditional pre-tax)
• 403(b) plans
• 457(b) governmental plans
• Defined benefit (pension) plans (in different form)

Notable exceptions:

Roth IRAs are specifically exempt from RMDs during the original owner's lifetime. Roth IRA funds can grow tax-free indefinitely, and the owner can pass the account to heirs without ever having taken a distribution. This is one of the Roth IRA's most valuable features for estate planning and for retirees who do not need the income. Note: Roth 401(k)s were previously subject to RMDs, but SECURE 2.0 eliminated Roth 401(k) RMD requirements starting in 2024. Rolling a Roth 401(k) to a Roth IRA also eliminates future RMD requirements for those who had previously done so to avoid the old Roth 401(k) RMD rule.

Current employer 401(k) plans for employees who are still actively working at the sponsoring employer: you can defer RMDs from the plan until April 1 of the year after you retire, even if you are past the normal RMD starting age. The exception does not apply to plans at former employers or to IRAs.

When Do RMDs Begin?

The age at which RMDs must begin has been changed twice by major legislation in recent years:

SECURE Act 2019: Raised the RMD starting age from 70½ to 72.

SECURE 2.0 Act 2022: Further raised the starting age to 73 for individuals who turn 72 after December 31, 2022 (i.e., anyone born on January 1, 1951 or later). SECURE 2.0 also provided for the RMD age to increase to 75 starting in 2033 for individuals born on January 1, 1960 or later.

Summary for current planning:

• Born before July 1, 1949 (turned 70½ before 2020): RMDs started at 70½
• Born July 1, 1949 – December 31, 1950: RMDs started at age 72
• Born January 1, 1951 – December 31, 1959: RMDs start at age 73
• Born January 1, 1960 or later: RMDs start at age 75 (starting in 2033)

For most current retirement planners under age 60, age 73 is the working planning assumption for when RMDs begin, with a potential further delay to 75 depending on birth year.

How to Calculate Your RMD

Your annual RMD amount is calculated using a straightforward formula:

RMD = Prior Year-End Account Balance ÷ Life Expectancy Factor

Step 1 — Get the prior year-end account balance. Your financial institution reports your December 31 account balance of the prior year on IRS Form 5498. If you have multiple IRAs at different institutions, you sum all balances for IRA RMD calculation purposes. (401k accounts are calculated separately per account.)

Step 2 — Find your life expectancy factor. The IRS provides tables in Publication 590-B. Most account owners use the Uniform Lifetime Table — Table III. A 73-year-old has a distribution period of 26.5; a 74-year-old has 25.5; a 75-year-old has 24.6; and so on, decreasing by approximately one each year. The table is designed so that RMDs gradually increase as a percentage of the account balance as you age.

Step 3 — Divide. Divide the prior December 31 balance by the factor from Table III. An account worth $500,000 on December 31 for a 73-year-old: $500,000 ÷ 26.5 = $18,868 minimum withdrawal required for the year.

Exception — spouse beneficiary rule: If your sole designated beneficiary is your spouse and your spouse is more than 10 years younger than you, you may use the more favorable Joint Life and Last Survivor Table (Table II), which produces a lower distribution factor (longer joint life expectancy) and therefore a smaller RMD. This exception only applies to the sole beneficiary situation with an age differential of more than 10 years.

Multiple IRA accounts: For traditional IRAs, you calculate the total RMD across all your IRAs combined, but you can satisfy the total requirement by taking the full amount from just one account. You do not need to take a proportional distribution from each account — this provides flexibility to draw from the account with the best liquidity or least favorable tax position first.

401(k) and 403(b) accounts: Unlike IRAs, RMDs from workplace plans must be taken separately from each plan. You cannot aggregate RMDs across 401(k) accounts at different former employers. The calculation method is the same, but the account-by-account calculation and distribution requirement applies.

Most major financial institutions (Fidelity, Schwab, Vanguard) provide RMD calculators that automatically compute your required amount once you provide your age and account balance. The IRS also provides a free RMD calculator at irs.gov and the SEC provides one at Investor.gov.

RMD Deadlines

First RMD: Special deadline applies only to your very first RMD. You can delay the first RMD until April 1 of the year following the year you reach your RMD starting age. If you turn 73 in 2024, your first RMD is for the year 2024 but can be taken any time between January 1, 2024 and April 1, 2025.

Subsequent RMDs: After the first year, all RMDs must be taken by December 31 of each calendar year.

The April 1 trap: Many retirees decide to delay their first RMD to April 1 of the following year, thinking this gives them more time and flexibility. However, this creates a situation where two RMDs are required in the same calendar year: the delayed first RMD (for the prior year) taken in January–April, plus the regular RMD for the current year taken by December 31. Two RMDs in one year can push significant income into higher tax brackets unexpectedly. For most people with moderate or predictable income, taking the first RMD in the year they turn 73 (rather than delaying) avoids this bunching problem.

Penalties for Missing RMDs

Missing an RMD or taking less than the required amount results in an excise tax on the amount that should have been withdrawn but wasn't. SECURE 2.0 (effective 2023) reduced this penalty:

• Prior law: 50% excise tax on the shortfall
• SECURE 2.0 current law: 25% excise tax on the shortfall, reduced to 10% if the failure is corrected within a two-year correction window

Example: You were required to take $20,000 as your RMD but only took $15,000 — a $5,000 shortfall. At the 25% rate, the excise tax is $1,250. If you correct the shortfall within two years by taking the missed amount, the tax reduces to $500 (10%).

The IRS Form 5329 is used to report the missed RMD and calculate the excise tax. The IRS also has a history of granting waivers for first-time RMD failures or reasonable-cause situations — applying for a waiver via a letter attached to Form 5329 has historically been successful for genuine mistakes.

Strategies to Manage RMD Tax Impact

RMDs create taxable income that cannot be avoided but can be strategically managed to minimize total lifetime taxes:

Roth conversions before RMD age. The years between retirement and age 73 (when RMDs begin) represent a potentially valuable window for Roth conversions. If you retire at 65 and do not yet have Social Security or RMD income, your taxable income may be temporarily low. Converting a portion of your traditional IRA to Roth each year during this window — paying taxes at today's (relatively lower) rate — reduces the future traditional IRA balance and thus reduces future RMDs. This strategy explicitly trades paying taxes today to avoid paying (potentially higher) taxes on larger RMDs later.

Strategic withdrawal sequencing. In early retirement years before RMDs begin, drawing income from traditional IRAs and 401(k)s rather than Roth accounts gradually depletes the pre-tax balance — reducing future RMDs. This sequencing decision involves multiple variables (current and projected tax rates, Social Security timing, Medicare premium surcharges) and often benefits from professional modeling.

RMD reinvestment. If you do not need the RMD income for living expenses, you are still required to take it — but you can immediately reinvest the after-tax amount in a taxable brokerage account. There is no rule requiring you to spend RMD income; the only requirement is that you withdraw it from the tax-advantaged account. The reinvested amount continues to grow (as an after-tax investment, now subject to capital gains treatment rather than ordinary income on growth).

Income management to avoid bracket creep. RMDs are ordinary income. Large RMDs can push you into higher tax brackets, trigger taxation of Social Security benefits (up to 85% of benefits become taxable above certain income thresholds), and trigger Medicare premium surcharges (IRMAA) if combined income exceeds certain levels. Advance modeling of projected RMD amounts and their interaction with other income sources — ideally 5–10 years before RMDs begin — allows for proactive strategies to avoid these additional tax costs.

Qualified Charitable Distributions (QCDs)

The Qualified Charitable Distribution is one of the most tax-efficient tools available to retirees who are charitably inclined. A QCD is a direct transfer of funds from an IRA to a qualified charity, up to $105,000 per year per person in 2024 (indexed for inflation, $210,000 per married couple). QCDs have several powerful tax properties:

Counts toward your RMD. A QCD satisfies your RMD requirement for the year, meaning it counts as your required distribution even though you receive no cash.

Excluded from taxable income. Unlike a regular IRA distribution where you take the money and then donate it to charity, a QCD is excluded from your gross income entirely. You receive no cash but also pay no income tax on the distribution.

No itemization required. Because the QCD is excluded from income rather than taken as a deduction, you don't need to itemize deductions to receive the full benefit. For the approximately 90% of Americans who now take the standard deduction, charitable giving through regular cash donations provides no income tax benefit — but QCDs provide a dollar-for-dollar income reduction.

Example: A 74-year-old has a $25,000 RMD requirement. She makes a $10,000 QCD directly from her IRA to her university. The $10,000 counts toward her RMD (so she only needs to take $15,000 more in regular distributions), and the $10,000 is completely excluded from her taxable income — saving her approximately $2,200 in federal taxes at the 22% bracket.

QCD rules: The owner must be at least 70½ (the QCD eligibility age has not been increased with the RMD age change). The distribution must go directly from the IRA to the charity — you cannot receive the money and then donate it. The charity must be a qualifying organization (501(c)(3)); donor-advised funds and private foundations do not qualify. The distribution must come from an IRA (not a 401k or other plan directly, though you can roll 401k to IRA first).

Inherited IRA RMD Rules

When you inherit an IRA, the RMD rules that apply depend on your relationship to the deceased, your age, and when the account owner died. SECURE Act 2019 significantly changed inherited IRA rules:

Spouse beneficiaries: Have the most flexibility. They can treat the inherited IRA as their own (rolling it into their existing IRA, subject to their own RMD rules), remain as the named beneficiary and take RMDs over their own life expectancy, or roll the funds to an inherited IRA and delay distributions until the deceased spouse would have reached the RMD starting age.

Non-spouse beneficiaries (post-SECURE Act): Most non-spouse beneficiaries of accounts owned by people who died after December 31, 2019 must deplete the inherited IRA within 10 years (the "10-year rule"). No annual RMDs are required in years 1–9, but the full account must be distributed by December 31 of the 10th year following the year of death. Importantly, IRS proposed regulations in 2022 would require non-spouses to take annual distributions in years 1-9 if the original owner had already reached their RMD beginning date — the final regulations on this are still evolving, so consult a tax professional.

Eligible designated beneficiaries: Certain categories are eligible for more favorable treatment (life-expectancy distributions rather than the 10-year rule): surviving spouses, minor children (until they reach majority), disabled or chronically ill individuals, and beneficiaries no more than 10 years younger than the deceased. These individuals can take distributions over their own life expectancy rather than the 10-year rule.

SECURE 2.0 Changes

The SECURE 2.0 Act of 2022 made several important changes to RMD rules beyond raising the starting age:

RMD penalty reduction: The excise tax for missing RMDs was cut from 50% to 25%, with a further reduction to 10% for timely correction within a two-year window.

Roth 401(k) RMD elimination: Starting in 2024, Roth 401(k) accounts are no longer subject to RMDs, putting them on equal footing with Roth IRAs. This change removed a key reason that some retirees had been rolling Roth 401(k)s to Roth IRAs upon retirement.

Surviving spouse election: A new provision allows surviving spouses to elect to be treated as the deceased spouse for RMD purposes — allowing them to delay RMDs using the deceased spouse's RMD starting age if it was later than the survivor's.

QCD indexing: The $100,000 QCD limit was indexed to inflation starting in 2024 (first adjustment brought it to $105,000 in 2024).

Future age increase: The RMD starting age will increase to 75 in 2033 for those born on January 1, 1960 or later.

RMDs are an inevitable feature of retirement accounts that hold pre-tax savings. They cannot be permanently avoided — only managed strategically to minimize their tax cost. The most impactful strategies — Roth conversions during the pre-RMD window, QCDs for charitably inclined retirees, and careful withdrawal sequencing — can save tens of thousands of dollars in lifetime taxes versus an unmanaged approach. Understanding these rules early enough to implement strategies is significantly more valuable than learning them after the first RMD arrives.