Overview

Required Minimum Distributions (RMDs) are annual withdrawals the IRS requires from most tax‑deferred retirement accounts so those funds eventually become taxable. The rules changed recently: for most people in 2025, the required beginning age is 73 (up from 72 under earlier law), and the excise tax for missed RMDs has been reduced from 50% to 25% (with a further reduction to 10% possible when the missed amount is corrected promptly) under SECURE Act 2.0. Always confirm your specific RMD age and penalty exposure because the timing of your birthday and changes in law can affect which rule applies to you [IRS – Required Minimum Distributions (RMDs)].

In my practice as a CFP® and CPA I commonly see retirees focus on the amount they must withdraw while overlooking the tax, Medicare, and estate consequences. Below I walk through the rules you need to know, calculation basics, actionable strategies, and common mistakes so you can create a defensible, tax‑efficient withdrawal plan.

(Authoritative references: IRS Required Minimum Distributions (RMDs) and IRS Publication 590‑B.)

Key rules and current updates (as of 2025)

  • RMD starting age: Generally age 73 for those who reach age 72 after 2022, per SECURE Act 2.0. If you reached 72 before 2023, older rules may apply—check the IRS guidance for your birth year [IRS RMDs].
  • Accounts covered: Traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer plans (401(k), 403(b), 457(b)) are subject to RMDs.
  • Roth IRAs: Roth IRAs do not require lifetime RMDs for the original account owner, though inherited Roths have rules.
  • Penalties: The excise tax for missed RMDs was reduced by SECURE 2.0 (generally 25% and 10% if corrected timely). The IRS can waive penalties in certain situations—use Form 5329 to request relief.

Sources: IRS — Required Minimum Distributions and Publication 590‑B.

How RMDs are calculated

  1. Determine the account balance as of December 31 of the prior year for each plan or IRA.
  2. Find the applicable life expectancy factor in the IRS Uniform Lifetime Table (or the Joint Life and Last Survivor Table if your spouse is the sole beneficiary and more than 10 years younger).
  3. Divide the prior year balance by the life expectancy factor. The result is that year’s RMD for that account.

Example: If your IRA balance on Dec 31 last year was $200,000 and your factor is 26.5, your RMD is $200,000 ÷ 26.5 ≈ $7,547.

Note: IRA RMDs can be aggregated across multiple IRAs (you calculate each separately then take the total from one or more IRAs). RMDs from employer plans generally must be taken separately unless you roll the plan into an IRA first.

Reference: IRS Publication 590‑B.

Practical strategies to manage RMDs

Below are practical, commonly used approaches I use with clients to reduce the tax drag, manage cash flow, and align distributions with broader retirement and estate goals.

  1. Roth conversions (partial, multi‑year):
  • Convert traditional IRA dollars to a Roth IRA in years when your taxable income is lower. Doing partial conversions over several years spreads the tax hit and reduces future RMDs because Roth IRAs have no lifetime RMDs for the original owner. Careful planning can avoid pushing you into a higher tax bracket or triggering higher Medicare Part B/D premiums (IRMAA).
  • See our in‑depth resources on Roth conversion planning for timing and tax‑bracket strategies: Roth Conversion.
  1. Qualified Charitable Distributions (QCDs):
  • If you are charitably inclined and at least age 70½, you can direct up to the QCD limit to an eligible charity. That amount counts toward your RMD and is excluded from taxable income (it’s not an itemized deduction but reduces taxable adjusted gross income). QCDs remain one of the most direct ways to neutralize the tax effect of an RMD.
  • For details on documentation and limits, see: Qualified Charitable Distribution (QCD).
  1. Timing within the year and smoothing withdrawals:
  • You can take your RMD any time during the calendar year (or by April 1 of the year after your required beginning date for the first RMD). Holding off until early in the year sometimes helps with cash‑flow planning; taking it earlier in the year leaves the rest of the year’s investment growth sheltered if you re‑invest the proceeds.
  • For married couples, consider staggering withdrawals between spouses to keep each in lower tax brackets.
  1. Consolidation and rollovers:
  • Rolling employer plans into an IRA can make RMD tracking simpler and sometimes allows IRA aggregation rules to work in your favor. But be careful: rolling a traditional 401(k) into a Roth would trigger tax on the converted amount.
  1. Income‑smoothing and bracket management:
  • Map expected Social Security, pension, and other income to anticipate which years will have low taxable income—those are ideal years for Roth conversions or selling appreciated assets.
  1. Use annuities and QLACs carefully:
  • A Qualified Longevity Annuity Contract (QLAC) can defer RMDs on the amounts used to fund it until the annuity start date. QLACs have IRS funding limits—work with your planner to determine if they make sense for longevity risk reduction.
  1. Coordinate with Medicare & tax credits:
  • Large RMDs can increase your MAGI and thus Medicare premiums (IRMAA) and phaseouts for credits or deductions. Model these interactions before executing large conversions or taking lump‑sum RMDs.

Special situations and inherited accounts

  • Inherited IRAs and employer plans follow different rules since the 2019 SECURE Act: many non‑spouse beneficiaries must withdraw the full account within 10 years (the “10‑year rule”). Other beneficiary categories (eligible designated beneficiaries) have different options—review the account’s beneficiary designation and plan documents.
  • Spousal rollovers: A surviving spouse can roll an inherited account into their own IRA (which can change RMD timing) or treat it as an inherited IRA; the choice has long‑term tax implications.

Reference: IRS guidance on inherited retirement accounts and the SECURE Act.

Common mistakes to avoid

  • Assuming the RMD age is 72 for everyone. The age now depends on your birth year—check IRS guidance.
  • Forgetting to combine all applicable accounts when calculating totals (IRA aggregation rules differ from employer plan rules).
  • Ignoring the RMD timing interaction with Medicare premiums and Social Security taxation.
  • Not documenting QCDs properly—QCDs must be made payable directly to the charity and you should keep the charity written acknowledgement.

Step‑by‑step checklist to implement a strategy (practical playbook)

  1. Confirm your RMD start year using IRS tools and your birthdate.
  2. Pull December 31 balances for each account and calculate RMD amounts using the IRS tables (or have your custodian provide the calculation).
  3. Run a tax projection for the year that includes RMDs, Social Security, pension, and other income.
  4. Identify low‑income years for possible Roth conversions and estimate the conversion amount that fills lower tax brackets.
  5. If you give to charity, evaluate a QCD to offset all or part of your RMD.
  6. Consider rolling employer plans to IRAs only after understanding how it changes RMD and creditor protections.
  7. Document distributions, especially QCDs, and file Form 5329 if you must request relief for missed RMDs.

Example scenario (illustrative)

Married couple, both 73 in 2025. Combined taxable income without RMDs: $45,000. One spouse’s traditional IRA has $400,000 (RMD ~ $15,000), and the other spouse has a 401(k) with required distributions of $5,000. Converting $20,000 to a Roth in a low‑income year can lower future RMDs and smooth taxable income over the next decade. If they also donate $10,000 via a QCD, that counts toward the IRA owner’s RMD and lowers taxable income for the year.

(Always model with a tax pro before executing conversions or QCDs.)

Useful links and additional reading

Professional disclaimer

This article is educational and does not provide individualized tax or investment advice. In my practice as a CFP® and CPA I review RMD strategies inside each client’s broader retirement plan; you should consult your own tax advisor or retirement planner before executing Roth conversions, QCDs, rollovers, or other tax‑sensitive actions.

If you’d like, I can outline a simple spreadsheet template you can use to calculate RMDs and model Roth conversion scenarios for the next 5–10 years.