Overview
Required Minimum Distributions (RMDs) determine how much you must withdraw and report as taxable income from tax‑deferred retirement accounts once you reach the IRS RMD age. The rules vary by account type, and small differences — such as whether you aggregate IRAs or treat each employer plan separately — change your tax bill and recordkeeping burden. This guide explains current RMD basics (including SECURE Act updates), practical strategies I use in client work, and an action checklist to help you manage RMDs across accounts.
Authoritative resources: IRS RMD information (IRS) and FINRA guidance on RMDs (FINRA). See IRS details at: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-plan-participant-employee-tips-required-minimum-distributions
Disclaimer: This article is educational and not personal tax or investment advice. Consult a qualified CPA or financial planner for recommendations tailored to your situation.
Key rules you must know (updated through 2025)
- RMD starting age: SECURE Act 2019 raised the age to 72 for many. SECURE 2.0 (2022) further raised the required beginning age to 73 for people who reach age 72 after December 31, 2022; additional adjustments apply in later years. Check IRS guidance each year for how the law applies to your birth year (IRS).
- Calculation date: RMDs are calculated using your account balance as of December 31 of the previous year and your life expectancy factor from IRS tables (Uniform Lifetime Table, Joint Life and Last Survivor Table for some joint annuitants, and separate inherited‑IRA tables for beneficiaries).
- Aggregation rules: Traditional IRAs — you can add the RMD amounts from multiple traditional IRAs and take the total from one or more IRAs. Employer plans (401(k), 403(b)) generally require separate RMDs for each plan unless you roll the funds into an IRA. Some 403(b) plans allow aggregation similar to IRAs; check plan documents.
- Roth treatment: Roth IRAs are not subject to RMDs during the original owner’s lifetime. Roth 401(k) accounts are subject to RMDs unless rolled to a Roth IRA.
- Still working exception: If you are still employed and own a workplace plan, you can often delay RMDs from that employer’s plan until you retire — provided you are not a 5% owner and the plan permits deferral.
- Penalties for missed RMDs: SECURE 2.0 reduced the excise tax for a missed RMD. The IRS now generally applies a lower excise penalty than the historic 50% in many cases; refer to current IRS guidance for exact amounts and correction procedures.
Account-specific rules and practical implications
- Traditional IRAs (individuals): You may aggregate RMDs across all traditional IRAs and satisfy the total using distributions from any single IRA or combination of IRAs. This simplifies execution when you have multiple custodians.
- 401(k) and other employer plans: Each employer plan’s RMD is calculated separately and generally must be distributed from that plan. Rolling an old 401(k) into an IRA (if permitted) converts an otherwise separate RMD into an IRA‑aggregated RMD, often simplifying withdrawals — but consider plan loan rules, creditor protections, and employer plan features before rolling.
- Inherited accounts: Beneficiary rules differ dramatically. In many cases, beneficiaries follow the 10‑year rule or life‑expectancy tables that differ from owner rules. Always treat inherited IRAs and inherited 401(k)s separately from owner RMD planning.
Internal resources: For consolidation pros/cons and how rolling accounts affects RMDs, see our article on Consolidation Strategies for Multiple Retirement Accounts (FinHelp). For tax‑aware withdrawal sequencing across mixed accounts, see Tax‑Effective Withdrawal Strategies from Mixed Retirement Accounts (FinHelp).
(Internal links: “Consolidation Strategies for Multiple Retirement Accounts” — https://finhelp.io/glossary/consolidation-strategies-for-multiple-retirement-accounts/; “Tax‑Effective Withdrawal Strategies from Mixed Retirement Accounts” — https://finhelp.io/glossary/tax-effective-withdrawal-strategies-from-mixed-retirement-accounts/)
How RMDs are calculated — a simple example
RMD = December 31 account balance / life expectancy factor from IRS table.
Example: You turned 73 in 2024, your traditional IRA balance on December 31, 2024 is $200,000, and your life expectancy factor (Uniform Lifetime Table) is 26.5. Your 2025 RMD = $200,000 ÷ 26.5 ≈ $7,547.
If you have multiple IRAs (e.g., IRA A = $120,000; IRA B = $80,000), calculate each account’s RMD but you may withdraw the combined total ($7,547 in the example) from one or both IRAs.
However, if you also hold a 401(k) at a former employer with a $100,000 balance, its RMD is calculated separately and must be taken from that 401(k) unless you roll it into an IRA.
Tax and timing strategies I use with clients
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Consolidation when appropriate: Rolling old employer plans into an IRA can reduce the number of separate RMDs you must manage. In my practice I review creditor protection differences, plan features, and investment options before recommending rollovers.
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Roth conversions (targeted): Converting taxable amounts from a traditional IRA to a Roth IRA during lower‑tax years reduces future RMDs (Roth IRAs have no lifetime RMDs). This trades paying tax now for smaller or no RMD obligations later and can be especially effective to manage Medicare IRMAA and Social Security taxation if timed correctly. Always run projections and consult a tax pro before converting.
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Qualified Charitable Distributions (QCDs): If you are charitably inclined and meet the age/plan requirements, a QCD from an IRA can satisfy part or all of your RMD while excluding that amount from taxable income. Verify eligibility and current IRS rules before using QCDs.
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Withdrawal sequencing and partial conversions: Use taxable accounts first in early retirement to preserve tax‑deferred balances for tax‑efficient IRA conversions or to manage RMDs. Coordinating distributions across account types reduces the chance of large income spikes once RMDs begin.
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Timing of the first RMD: You can delay your first RMD until April 1 of the year after you reach the RMD age. That results in two RMDs in one calendar year (the delayed prior‑year RMD plus the current‑year RMD), which often increases taxable income for that year. Most clients prefer taking the first RMD in the year they turn the required age to avoid the two‑RMD year.
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Use tax‑loss harvesting and tax credits: Offset increased income from RMDs by managing capital gains/losses and claiming available credits where appropriate.
Examples that show tradeoffs
Case A — Multiple IRAs and no 401(k): Mary has three IRAs totaling $500,000. Her 2025 RMD = $500,000 ÷ factor (assume 25) = $20,000. She can take the full $20,000 from her smallest IRA to simplify recordkeeping.
Case B — IRAs + old 401(k): Tom has $300,000 in an IRA and $100,000 in a former employer 401(k). His IRA RMD is $11,000 and his 401(k) RMD is $3,500 (separate). Rolling the 401(k) into the IRA (after checking protections and plan rules) converts the two required distributions into one aggregated IRA RMD, which may allow him to withdraw from the most tax‑efficient bucket.
Case C — Roth 401(k) vs Roth IRA: Lisa has a Roth 401(k) of $200,000 and a Roth IRA of $150,000. The Roth 401(k) is subject to RMDs unless rolled into a Roth IRA. Rolling the Roth 401(k) into the Roth IRA eliminates lifetime RMDs and simplifies planning.
Common mistakes and how to avoid them
- Missing the deadline for the first RMD and triggering accelerated income in a single year — plan your timing.
- Treating Roth IRAs like traditional IRAs — Roth IRAs do not require RMDs during the owner’s life.
- Forgetting aggregation rules — combining IRA RMDs into one withdrawal can reduce administrative work.
- Assuming employer plans allow rollovers — always confirm plan rules, creditor protection differences, and survivor options before moving assets.
Penalties, recent changes, and corrections
SECURE 2.0 reduced the heavy excise tax for missed RMDs that existed historically; the IRS also provides correction procedures which may greatly reduce the penalty if you act quickly. If you miss an RMD, contact your custodian and tax advisor immediately to confirm correction and file any necessary IRS forms. See the IRS RMD page for the latest correction procedures (IRS).
Action checklist (practical next steps)
- Inventory accounts: List all IRAs, 401(k)s, 403(b)s, and annuities with balances and custodian contact info.
- Verify your RMD starting age based on birth year and current IRS guidance.
- Confirm aggregation rules and plan rollover options with each plan administrator.
- Project RMDs for the next 3–5 years to spot tax spikes and conversion opportunities.
- Discuss Roth conversions, QCDs, and rollover choices with your CPA or financial planner.
- Set up recurring distributions or calendar reminders to avoid missed RMDs.
When to get professional help
If you have multiple employer plans, inherited accounts, a mix of Roth and traditional balances, or income‑sensitive benefits (Medicare IRMAA, Medicaid, Social Security taxation), work with a CPA or fee‑only financial planner. In my practice, clients with mixed account types benefit from an integrated withdrawal model that coordinates tax, cash flow, and benefit impacts.
Additional resources
- IRS Required Minimum Distributions (RMDs) – official guidance: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-plan-participant-employee-tips-required-minimum-distributions
- FINRA investor alert on RMDs: https://www.finra.org/investors/alerts/retirement-required-minimum-distributions
- FinHelp articles: Consolidation Strategies for Multiple Retirement Accounts (https://finhelp.io/glossary/consolidation-strategies-for-multiple-retirement-accounts/), Tax‑Effective Withdrawal Strategies from Mixed Retirement Accounts (https://finhelp.io/glossary/tax-effective-withdrawal-strategies-from-mixed-retirement-accounts/)
Professional disclaimer: This content is educational only and does not constitute individualized tax or investment advice. Rules change; always verify with your tax advisor or the IRS before making decisions.