An RMD, required minimum distribution, is the minimum amount you must withdraw from certain retirement accounts each year once you reach a specified age. The IRS requires these withdrawals because money in tax-deferred accounts like traditional IRAs and 401(k)s has never been taxed. RMDs ensure that tax eventually gets collected.
The government gave you a tax break when the money went in. RMDs are how they collect the other side of the deal.
Which Accounts Have RMDs
Subject to RMDs:
- Traditional IRA
- SEP IRA
- SIMPLE IRA
- 401(k) plans (traditional)
- 403(b) plans
- 457(b) governmental plans
- Most other employer-sponsored retirement plans
Not subject to RMDs during the owner’s lifetime:
- Roth IRA (the original account owner never has RMDs)
- Roth 401(k), starting in 2024, the SECURE 2.0 Act eliminated RMDs from Roth 401(k)s during the owner’s lifetime
Inherited accounts have their own RMD rules, which differ significantly from owner RMDs.
When RMDs Begin
The starting age depends on your birth year, following changes made by the SECURE Act (2019) and SECURE 2.0 Act (2022):
| Birth Year | RMD Starting Age |
|---|---|
| Before 1951 | 70½ |
| 1951–1959 | 73 |
| 1960 and later | 75 |
Your first RMD can be delayed until April 1 of the year after you reach your RMD age. But if you do that, you’ll have two RMDs in the same calendar year, one for the delayed year and one for the current year, which could push you into a higher tax bracket. Most people take the first RMD in the year they reach the starting age to avoid this.
How RMDs Are Calculated
The RMD amount is calculated by dividing your account balance (as of December 31 of the prior year) by a life expectancy factor from IRS tables.
RMD = Prior year-end account balance ÷ Life expectancy factor
The IRS provides three life expectancy tables:
- Uniform Lifetime Table, used by most account owners
- Joint and Last Survivor Table, used when your sole beneficiary is a spouse more than 10 years younger
- Single Life Expectancy Table, used primarily by beneficiaries of inherited accounts
The factor decreases as you age, which means the percentage of your account you must withdraw increases each year.
Example: At age 73, the Uniform Lifetime Table factor is 26.5. If your IRA balance on December 31 of the prior year was $500,000, your RMD is $500,000 ÷ 26.5 = $18,868.
Your IRA custodian often calculates and even distributes the RMD automatically if you set it up. Employer plan administrators may also offer this service.
Multiple Accounts
If you have multiple traditional IRAs, you calculate the RMD separately for each account, but you can take the total amount from any one IRA or a combination. You don’t have to draw proportionally from each.
For 401(k)s, you must take the RMD separately from each employer plan. You can’t satisfy a 401(k) RMD from an IRA, or vice versa.
Tax Treatment
RMDs count as ordinary income in the year you receive them. They’re added to your other income and taxed at your marginal rate. This can affect:
- Federal and state income taxes
- Medicare premium surcharges (IRMAA) if income crosses certain thresholds
- Taxation of Social Security benefits
- Eligibility for certain deductions and credits that phase out at higher incomes
RMDs can’t be put back into a traditional IRA or 401(k). They can’t be “undone” like regular contributions can be reversed. Once distributed, the money is in taxable territory.
If You Do Not Need the Money
If you don’t need the RMD for living expenses, you still have to take it, you can’t waive the requirement. However, you have options for what to do with the funds:
Invest it in a taxable brokerage account. The money loses its tax-deferred status, but can continue to grow.
Qualified Charitable Distribution (QCD). If you’re 70½ or older, you can direct up to an annual limit (indexed for inflation each year — check IRS.gov for the current figure) from your IRA directly to a qualified charity. The QCD satisfies the RMD and is excluded from your taxable income, which can be more tax-efficient than taking the distribution, paying taxes, and then donating.
Roth conversion. You can’t convert the RMD amount itself to a Roth IRA, but after satisfying the RMD, you can convert additional amounts. This reduces future RMDs by shrinking the pre-tax account over time.
The Penalty for Missing an RMD
The penalty for failing to take an RMD is significant: 25% of the amount you should have withdrawn (reduced to 10% if corrected within two years). The IRS calls this an “excise tax.”
Given that, most people set up automatic distributions with their custodian and track the annual deadline, December 31, or April 1 of the following year for the first RMD only.
Inherited IRA RMDs
When you inherit a retirement account, the rules differ significantly depending on your relationship to the deceased and when you inherited. The SECURE Act substantially changed inherited IRA rules in 2020. Beneficiaries who aren’t spouses, minor children, disabled, or chronically ill generally must empty the inherited account within 10 years.
Inherited IRA rules are complex enough to warrant advice from a tax professional before making any moves.
Frequently Asked Questions
Q: Can I take more than the RMD?
Yes. The RMD is a minimum, not a maximum. You can withdraw more than required in any year. Additional withdrawals are taxed the same way.
Q: What if I am still working at my RMD age?
If you’re still working and participating in your current employer’s 401(k), you may be able to delay RMDs from that specific plan until you retire, this exception doesn’t apply to IRAs or old employer plans. Check your plan documents.
Q: Do I owe RMDs on a Roth 401(k)?
Not anymore. SECURE 2.0, effective 2024, eliminated RMDs from Roth designated accounts (like Roth 401(k)) during the owner’s lifetime. If you have an old Roth 401(k) and want to avoid RMDs definitively, rolling it into a Roth IRA also eliminates any ambiguity.
Q: Does an RMD affect my Social Security?
Not directly, RMDs don’t reduce your Social Security benefit. But the additional income from an RMD can cause more of your Social Security benefits to become taxable. Up to 85% of Social Security benefits can be taxed depending on your combined income.