Required Minimum Distributions (RMDs) Explained

Required Minimum Distributions are one of those retirement topics that seem technical until they're not — until the year you turn 73 and suddenly discover that the IRS has strong opinions about how much of your retirement savings you must withdraw, whether you need the money or not. Understanding RMDs before they begin gives you meaningful tax-planning options. Ignoring them until they arrive does not.

What Are Required Minimum Distributions?

RMDs are the minimum annual withdrawals the IRS requires you to take from most tax-deferred retirement accounts beginning at age 73 (for those born after 1950 under current law as of 2025). The IRS established RMDs to ensure that tax-deferred retirement savings are eventually taxed — after all, you received a tax deduction when you contributed, and the growth was tax-deferred. The government wants its share before you pass the funds to heirs.

Which Accounts Require RMDs?

RMDs apply to:

• Traditional IRAs
• Traditional 401(k) plans
• 403(b) plans
• 457(b) government plans
• SEP IRAs and SIMPLE IRAs
• Inherited IRAs (with different rules depending on the relationship to the original owner)

Roth IRAs do NOT require RMDs during the original owner's lifetime. This is one of the primary advantages of Roth accounts in retirement planning. Roth 401(k)s historically required RMDs, but the SECURE 2.0 Act eliminated this requirement starting in 2024 — they now follow Roth IRA rules.

How RMD Amounts Are Calculated

Your RMD for each year is calculated by dividing your account balance as of December 31 of the previous year by your life expectancy factor from the IRS Uniform Lifetime Table.

Each account's RMD is calculated separately, but for traditional IRAs, you can take the total IRA RMD from any one IRA or a combination — you don't need to withdraw from each account individually. 401(k) RMDs, however, must be taken separately from each plan.

The Penalty for Missing RMDs

The penalty for failing to take a required RMD is significant: 25% of the amount you should have withdrawn (reduced to 10% if corrected within two years). On a $20,000 missed RMD, that's a $5,000 penalty — on top of the ordinary income tax you'll still owe when you eventually withdraw. The IRS does grant penalty waivers in cases of reasonable error, but the process requires filing for relief and is not guaranteed.

Tax Implications of RMDs

RMDs are taxed as ordinary income in the year you receive them. If your RMD is large relative to your other income, it can push you into a higher tax bracket, increase the taxable portion of your Social Security benefits, and trigger IRMAA surcharges on your Medicare premiums.

This is why pre-RMD tax planning matters so much. The years between retirement and age 73 are often a window of lower taxable income — an opportunity to convert traditional IRA funds to Roth, take strategic withdrawals at lower tax rates, and reduce the balance subject to future RMDs.

Strategies to Manage RMDs

Qualified Charitable Distributions (QCDs)

If you are 70½ or older, you can direct up to $105,000 per year (2025 limit) from your IRA directly to a qualified charity. This Qualified Charitable Distribution counts toward your RMD but is excluded from your taxable income — potentially the most tax-efficient giving strategy available to retirees who itemize or who give regularly to charity.

Roth Conversions Before 73

Converting traditional IRA funds to Roth in the years before RMDs begin reduces the balance subject to future RMDs. The conversion is taxable in the year it occurs, but reducing future RMDs can lower your lifetime tax bill — especially if tax rates rise.

Still Working Exception

If you are still working at 73 and participating in your current employer's 401(k), RMDs from that specific plan may be delayed until you retire. This exception does not apply to IRAs or old 401(k)s from former employers.