Required Minimum Distributions (RMDs): When, How, and How Much You Must Withdraw
Starting at age 73, the IRS requires you to withdraw a minimum amount from your 401(k) and Traditional IRA each year. Miss the deadline and the penalty is 25% of the amount not withdrawn. Here's everything you need to know about RMDs.
A Required Minimum Distribution (RMD) is the minimum amount you must withdraw annually from tax-deferred retirement accounts including Traditional IRAs, 401(k)s, 403(b)s, SEP IRAs, and SIMPLE IRAs. Roth IRAs have no RMDs during the owner's lifetime. The purpose of the RMD rule is to prevent retirement accounts from being used as permanent tax shelters — the IRS wants its deferred tax revenue eventually. The amount you must withdraw is calculated based on your account balance and life expectancy, and it is taxed as ordinary income in the year you receive it. Retirement planning basics →
When RMDs Start: Age Rules and Deadlines
The age at which RMDs begin has changed under recent legislation. Under the SECURE 2.0 Act, if you turn 73 in 2023 or later, your RMD starting age is 73. If you turn 74 after December 31, 2032, the starting age increases to 75. The first RMD must be taken by April 1 of the year after you turn 73 (or the applicable starting age). All subsequent RMDs must be taken by December 31 each year. Delaying your first RMD to April 1 means you will have to take two RMDs in the same year — the delayed first RMD plus the current year's RMD — which can push you into a higher tax bracket. Planning your first withdrawal in the year you turn 73 avoids this double-distribution problem. Plan RMDs into your retirement timeline →
How to Calculate Your RMD
The calculation is straightforward: divide your prior year-end account balance by the IRS life expectancy factor from the Uniform Lifetime Table. For example, with $500,000 in a Traditional IRA at age 73, the IRS life expectancy factor is 26.5. Your RMD would be $500,000 / 26.5 = $18,868. The Uniform Lifetime Table provides factors for every age starting at 72 (the table assumes a beneficiary who is 10 years younger). If your spouse is the sole beneficiary and is more than 10 years younger, you use the Joint Life Expectancy Table, which gives a lower RMD. The IRS updates these tables periodically — always use the most current version for your calculation year.
Tax Treatment and Consequences
RMDs are taxed as ordinary income at your marginal tax rate. Large RMDs can have cascading tax consequences: they can push you into higher tax brackets, trigger higher Medicare premiums through Income-Related Monthly Adjustment Amounts (IRMAA) surcharges, and cause up to 85% of your Social Security benefits to become taxable. For example, with a $1M Traditional IRA at age 73, the RMD factor is 26.5, giving a first RMD of $37,736. Combined with Social Security of $30,000 and other income of $10,000, your total income would be approximately $77,736, placing you in the 22% tax bracket. The IRMAA surcharge thresholds begin at $85,000 (single) — staying below these thresholds is an important planning consideration. Optimize your RMD tax strategy →
Strategies to Reduce RMDs
Roth conversions before RMD age: Converting Traditional IRA funds to a Roth IRA before RMDs begin reduces your tax-deferred balance, lowering future RMDs. Roth IRAs have no RMDs during your lifetime. You pay income tax on the converted amount now, but that tax may be lower than what you would pay on large RMDs later. Converting $200,000 before age 73 from a $1M IRA leaves an $800,000 balance, reducing the first RMD from $37,736 to $30,189 — a meaningful reduction in taxable income.
Qualified Charitable Distributions (QCDs): If you are 70.5 or older, you can transfer up to $105,000 per year directly from your IRA to a qualified charity. The QCD satisfies your RMD requirement, and the distribution is not included in your taxable income. This is particularly valuable if you do not itemize deductions, since charitable contributions through QCDs are excluded from income entirely rather than claimed as a deduction.
Withdraw more than the minimum: In years with low income or high medical deductions, consider withdrawing more than your RMD to reduce the balance and lower future RMDs. This strategy works best before RMD age or during years when you have large itemized deductions that offset the additional income.
Penalties for Missing RMDs
The penalty for failing to take your full RMD by the deadline is 25% of the shortfall — the amount you failed to withdraw. If you correct the error promptly (within two years) and file Form 5329 showing reasonable cause, the penalty can be reduced to 10%. Before the SECURE 2.0 Act, the penalty was 50%, so the reduction is significant. Despite the lower penalty, missing an RMD is costly and easily avoidable. Most IRA custodians and 401(k) plan administrators will calculate and notify you of your RMD amount, but the responsibility to withdraw on time is ultimately yours.
Multiple Accounts and Inherited IRAs
If you have multiple Traditional IRAs, you calculate the RMD for each separately but can withdraw the total amount from any one IRA. This simplifies management — you can take your entire RMD from your largest IRA. However, for 401(k) plans, RMDs must be taken separately from each 401(k) you hold. Inherited IRAs have different rules under the SECURE Act: most beneficiaries must withdraw the entire balance within 10 years of the original owner's death. No annual RMDs are required during that period, but the full account must be emptied by December 31 of the year containing the 10th anniversary of death. Inherited IRA rules explained →
What age do RMDs start?
RMDs start at age 73 if you turn 73 in 2023 or later. If you turn 74 after December 31, 2032, the starting age increases to 75. Your first RMD must be taken by April 1 of the year after you reach the applicable age. All subsequent RMDs must be taken by December 31 each year.
How is RMD calculated?
Divide your prior year-end account balance by the IRS life expectancy factor from the Uniform Lifetime Table. At age 73, the factor is 26.5. A $500,000 balance gives an RMD of $18,868. The factor decreases as you age, meaning your RMD as a percentage of your balance increases over time.
Can I avoid RMDs?
Roth IRAs have no RMDs during the owner's lifetime, so converting Traditional IRA funds to Roth before RMD age effectively avoids future RMDs on that amount. Qualified Charitable Distributions (QCDs) satisfy your RMD requirement without counting as taxable income. Working past RMD age? You can delay RMDs from your current employer's 401(k) until you retire, provided you do not own more than 5% of the company.
What happens if I miss my RMD deadline?
The penalty is 25% of the amount you failed to withdraw. If you correct the error within two years and show reasonable cause on Form 5329, the penalty is reduced to 10%. Before SECURE 2.0, the penalty was 50%, making the new lower penalty a significant improvement. Most custodians will notify you of your RMD, but the responsibility is yours.
Related Resources
Retirement Planning Guide
Build a complete retirement plan that accounts for RMDs.
Roth Conversion Ladder Guide
Reduce RMDs by converting traditional funds to Roth.
401k vs IRA vs Roth IRA
Compare retirement accounts and their RMD rules.
Tax Planning Guide
Manage RMD tax impact with smart bracket planning.
Inherited IRA Rules Guide
Understand RMD rules for inherited retirement accounts.
Sequence of Returns Risk Guide
Protect your portfolio from sequence risk during RMD years.