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Why RMDs Exist
When you contributed to a traditional IRA or 401(k), the government gave you a tax break — contributions reduced your taxable income that year. The trade-off: the IRS eventually wants to tax that money. Required minimum distributions are the mechanism for ensuring that happens. The government can't wait indefinitely for its share of tax-deferred growth, so Congress created rules requiring retirees to start withdrawing — and paying taxes on — those funds once they reach a certain age.
The amount you must withdraw is calculated annually using your account balance and a life expectancy factor from the IRS Uniform Lifetime Table (Publication 590-B). The factor decreases each year you age, which means the required percentage of your balance you must withdraw grows over time.
Which Accounts Are Subject to RMDs?
RMDs apply to all tax-deferred retirement accounts:
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k) plans
- 403(b) plans
- 457(b) governmental plans
- Other defined-contribution plans
Roth IRAs are NOT subject to RMDs during the original owner's lifetime. This is one of the most significant advantages of Roth accounts — money can grow tax-free indefinitely and be passed to heirs without forced withdrawals. Note: inherited Roth IRAs are now subject to the 10-year withdrawal rule for most non-spouse beneficiaries under the SECURE Act.
When RMDs Begin: The New Rules Under SECURE 2.0
The SECURE 2.0 Act (signed December 2022) raised the RMD starting age again:
- Born 1950 or earlier: RMDs started at 70½ (original law) or 72 (SECURE 1.0, 2019) — already in effect
- Born 1951–1959: RMDs begin at age 73
- Born 1960 or later: RMDs begin at age 75
The first RMD can be delayed to April 1 of the year following the year you turn 73, but most financial advisors recommend against this — it results in two taxable RMDs in the same calendar year, potentially pushing you into a higher tax bracket and increasing Medicare premiums (IRMAA surcharges).
How to Calculate Your RMD
The formula is straightforward: RMD = Prior December 31 Account Balance ÷ IRS Life Expectancy Factor
The life expectancy factor comes from the IRS Uniform Lifetime Table (Publication 590-B). At age 73, the factor is 26.5, so you divide your balance by 26.5. At age 80, the factor is 20.2. At age 90, it's 12.2. The factor decreases each year, meaning the required withdrawal percentage grows as you age.
| Age | IRS Factor | RMD Amount | % of Balance |
|---|---|---|---|
| 73 | 26.5 | $18,868 | 3.77% |
| 75 | 24.6 | $20,325 | 4.07% |
| 80 | 20.2 | $24,752 | 4.95% |
| 85 | 16.0 | $31,250 | 6.25% |
| 90 | 12.2 | $40,984 | 8.20% |
What Happens If You Miss an RMD?
Missing an RMD — or taking less than the required amount — triggers a 25% excise tax on the shortfall. (The SECURE 2.0 Act reduced this from 50%, effective 2023.) If the mistake is corrected within two years, the penalty drops to 10%. You must also still take the full required amount and file IRS Form 5329. Most financial institutions automatically remind clients of upcoming RMDs and can facilitate the withdrawal directly, but the responsibility is ultimately yours.
Smart Strategies to Manage RMD Tax Impact
Roth Conversions Before 73
Converting traditional IRA funds to a Roth IRA in the years before RMDs kick in — particularly in low-income years between retirement and Social Security claiming — reduces your future RMD amounts. Roth conversions are taxable events, but you're converting at (presumably) lower rates than you might face when large RMDs plus Social Security are all being taxed simultaneously.
Qualified Charitable Distributions (QCDs)
If you're 70½ or older and charitably inclined, a QCD is one of the most powerful tax strategies available. You instruct your IRA custodian to transfer money directly to a qualifying charity — up to $105,000/year (2024). The QCD counts toward your RMD but is completely excluded from taxable income. This is better than taking the RMD as income and donating separately, because it reduces your AGI, which can lower Medicare IRMAA surcharges, reduce taxation of Social Security benefits, and keep you in a lower tax bracket.
Work Delay Exception for 401(k)s
If you are still working at age 73 and do not own more than 5% of the company, you can defer RMDs from your current employer's 401(k) until you retire. This exception does not apply to IRAs or to 401(k) plans from previous employers.
Use the RMD Calculator to see your required withdrawal amount and a 10-year projection of how RMDs grow as your factor decreases. For the bigger picture, read The 4% Rule Explained to understand how voluntary withdrawals and RMDs fit together in a retirement income strategy.
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Frequently Asked Questions
What accounts are subject to RMDs?
Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k), 403(b), and 457(b) plans are all subject to RMDs. Roth IRAs are NOT subject to RMDs during the original owner's lifetime. Inherited Roth IRAs, however, are subject to the 10-year withdrawal rule for most non-spouse beneficiaries.
When do required minimum distributions start?
Under SECURE 2.0: born 1951–1959, RMDs begin at age 73. Born 1960 or later, RMDs begin at age 75. The first RMD can be delayed to April 1 of the following year, but this results in two taxable RMDs in one calendar year.
Can I reinvest my RMD after taking it?
Yes. Once you take your RMD and pay income tax on it, you can invest the after-tax proceeds in a taxable brokerage account. You cannot put RMD funds back into an IRA — only new contributions up to annual limits are allowed.
What is a Qualified Charitable Distribution (QCD)?
A QCD is a direct transfer from your IRA to a qualifying charity, available at age 70½ or older. QCDs count toward your RMD but are excluded from taxable income — up to $105,000/year (2024). This is significantly more tax-efficient than taking the RMD as income and donating separately.