Overview

Required Minimum Distributions (RMDs) force withdrawals from most tax-deferred retirement accounts so the government eventually taxes those funds. Current law (SECURE Act 2.0) sets the RMD starting age at 73 for most people beginning in 2023; the age will increase to 75 in 2033 (unless future law changes) (IRS: Retirement Plan Distributions). Failing to take a required distribution can produce a large excise tax, though the penalty was reduced by recent legislation.

In my 15+ years advising retirees, RMD timing and tax effects are among the single biggest retirement-planning issues clients overlook. Mistiming or misunderstanding RMD rules can push you into higher tax brackets, increase Medicare Part B/D premiums, and complicate estate plans.

(Authoritative sources: IRS retirement plan rules and SECURE Act 2.0 summaries — see IRS: Retirement Plan Distributions.)

How are RMDs calculated?

The basic RMD formula is simple:

  • RMD = (Account balance as of December 31 of the previous year) ÷ (IRS life-expectancy factor)

The IRS publishes life-expectancy tables (Uniform Lifetime Table, Joint and Last Survivor Table, and Single Life Table). Which table you use depends on your situation (for example, whether your spouse is more than 10 years younger and is the sole beneficiary). Use the balance from December 31, not a current balance, and apply the distribution period (life-expectancy factor) from the appropriate IRS table (IRS life-expectancy tables).

Example (illustrative): If your account was $400,000 on December 31 and your chosen IRS factor is 28.0, your RMD would be about $14,286. This example uses a hypothetical factor — always consult the IRS tables or your plan administrator for the exact number.

Important calculation notes:

  • Use the December 31 balance of the prior year for every year’s RMD calculation. Do not use a mid-year balance.
  • Each account type may require its own calculation, but aggregation rules (below) affect whether you can combine withdrawals.

When do I have to take my first RMD?

  • First-year rule: You can take your first RMD by April 1 of the calendar year after you reach the RMD starting age (73 under current law). For example, if you turn 73 in 2025, your first RMD is due by April 1, 2026.
  • Subsequent years: After your first RMD, you must take future RMDs by December 31 of each year.

Be careful: delaying your first RMD until April 1 means you’ll likely owe two RMDs in the same tax year (the delayed first-year RMD plus that year’s RMD), which can increase your taxable income for that year.

(IRS: Retirement Plan Distributions)

Which accounts require RMDs — and which don’t?

Require RMDs (typical examples):

  • Traditional IRAs (including SEP and SIMPLE IRAs)
  • 401(k), 403(b), 457(b) plans (employer plans) for distributions from those accounts
  • Inherited IRAs and inherited retirement accounts (special rules apply after the SECURE Act)

Do not require RMDs during the original owner’s lifetime:

  • Roth IRAs (while the original owner is alive) — Roth IRAs are exempt from RMDs during the account owner’s lifetime, though Roth 401(k) balances generally do require RMDs unless rolled to a Roth IRA.

Special employer-plan rule: If you are still working for the plan sponsor and you are NOT a 5% owner, you may be able to delay RMDs from your current employer’s 401(k) until you retire. That exception does not apply to IRA accounts.

(IRS: Retirement Plan Distributions)

Aggregation rules (what accounts you can combine)

  • IRAs: You must calculate the RMD for each traditional IRA you own, but you may withdraw the total required amount from any one or more of your IRAs. In other words, IRA RMDs can be aggregated.
  • Employer plans (401(k), 403(b), 457): Generally, RMDs must be taken separately from each plan. You can, however, roll balances into a single plan or into an IRA (subject to plan rules) to simplify RMDs.

Because fine points and exceptions apply to 403(b) and government 457 plans, check with plan administrators or your advisor before assuming you can aggregate across plans.

Penalties for missing an RMD (and recent changes)

Prior to SECURE Act 2.0, the penalty for failing to take an RMD was a 50% excise tax on the amount not distributed. SECURE Act 2.0 reduced that penalty:

  • The excise tax is generally 25% of the amount not distributed.
  • If the missed distribution is corrected in a timely way (and meets IRS correction procedures), the excise tax can be reduced to 10% (check IRS guidance for what constitutes timely correction and documentation requirements).

Even with the lower penalty, it’s costly and administratively burdensome to miss an RMD. If you discover an error, work with your plan custodian and tax advisor immediately to correct the missed distribution and file any required forms.

(IRS: Retirement Plan Distributions; SECURE Act 2.0 summaries)

Tax effects and planning considerations

RMDs count as taxable income (ordinary income) when withdrawn from tax-deferred accounts. That income can:

  • Increase your marginal tax rate for the year
  • Affect Medicare premiums (IRMAA) and taxability of Social Security benefits
  • Reduce eligibility for income-tested tax credits or cost-free programs

Practical strategies I use with clients:

  • Roth conversions prior to the RMD age: Convert portions of a traditional IRA to a Roth IRA in lower-income years to reduce future RMDs (and the associated taxable income). Keep in mind conversions are taxable events.
  • Timing and bunching: If you can control when distributions land (e.g., take a larger RMD late in the year vs earlier), coordinate with other income timing to avoid pushing into a higher tax bracket.
  • Qualified Charitable Distributions (QCDs): If you are charitably inclined, you can direct up to $100,000 per year from your IRA to eligible charities as a QCD. QCDs count toward your RMD and are excluded from taxable income (subject to QCD rules). Note: the donor must meet the QCD age requirement and follow documentation rules (IRS QCD guidance).
  • Use tax-bracket mapping: Work with a tax advisor to model the tax impact of RMDs, Social Security timing, and Medicare premium phases.

See our deeper guidance on RMD Strategies and Timing: Reducing Taxes on Required Withdrawals for tactical examples and a multi-year planning approach.

Inherited accounts and special rules

The rules for beneficiaries changed significantly after the SECURE Act (2019). Many non-spouse beneficiaries who inherit an IRA or employer plan must distribute the entire account within 10 years (the “10-year rule”), although certain eligible designated beneficiaries (minor children, disabled individuals, chronically ill, and beneficiaries not more than 10 years younger) have different schedules. Spouse beneficiaries have more options, including treating the IRA as their own in many cases.

Because beneficiary rules are complex and frequently updated, review beneficiary designations and consider whether rolling an employer plan to an IRA or changing beneficiaries is appropriate. See our guidance on RMD Planning for Owners of Multiple Retirement Accounts for aggregation and beneficiary considerations.

Common mistakes and how to avoid them

  • Missing the RMD deadline (or misunderstanding the first-year April 1 vs. December 31 nuance).
  • Forgetting that Roth 401(k) balances may require RMDs unless converted or rolled to a Roth IRA.
  • Treating different account types the same for aggregation rules.
  • Not coordinating RMDs with other taxable events (Social Security, capital gains, Roth conversions).

Actionable prevention steps:

  • Add calendar reminders well before December 31 and the April 1 first-year deadline.
  • Confirm account balances with custodians each December and document distributions.
  • Meet annually with a tax advisor during the run-up to RMD age to model tax scenarios.

Frequently asked practical questions

  • Can I withdraw more than my RMD? Yes. You can always take more than the RMD; the extra amount is taxed as ordinary income in the year withdrawn.
  • Does a Roth IRA have RMDs? No — Roth IRAs do not require RMDs for the original owner. Roth 401(k) plans do require RMDs unless you roll them to a Roth IRA.
  • Can I use my RMD to satisfy a QCD? Yes — a QCD counts toward your RMD and can reduce taxable income if you follow the QCD rules.

Next steps and when to consult an advisor

If you’re within a few years of the RMD age or already past it, schedule a review with a fee-only financial planner or tax advisor. In my practice, running a 3–5 year RMD tax projection helps clients see the years where Roth conversions or charitable gifts make the most sense.

Professional disclaimer

This article is educational only and does not constitute individualized tax, legal, or investment advice. For advice tailored to your situation, consult a qualified financial planner or tax professional.

Authoritative references

Related reading on FinHelp.io

By understanding the timing, calculation, and tax effects of RMDs now, you can build a smoother, lower-tax retirement distribution plan and avoid costly mistakes.