Required Minimum Distributions (RMDs): Everything You Need to Know

What Are RMDs and When Do They Start?

Required minimum distributions are annual withdrawals the IRS mandates from most tax-deferred retirement accounts, including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, and 457(b) plans. The government deferred taxes on contributions and growth for decades — RMDs are the mechanism by which those deferred taxes are eventually collected.

Under the SECURE 2.0 Act signed in December 2022, the RMD starting age increased to 73 for anyone who turns 72 after December 31, 2022. For those born in 1960 or later, the RMD age will increase further to 75. If you turned 72 before 2023, your RMD rules follow the prior law (age 72).

The first RMD can be delayed until April 1 of the year following the year you turn 73. However, delaying the first RMD means taking two distributions in the same calendar year, which can push you into a higher tax bracket. In most cases, taking the first RMD in the year you turn 73 is the better strategy.

How to Calculate Your RMD

Your RMD is calculated by dividing your account balance on December 31 of the prior year by a life expectancy factor from the IRS Uniform Lifetime Table. For most account holders, the relevant factor comes from Table III (Uniform Lifetime).

If you have multiple IRAs, you calculate the RMD for each separately but can take the total from any one or combination of IRA accounts. For 401(k) plans, each plan's RMD must be taken from that specific plan — you cannot aggregate 401(k) RMDs across plans.

Penalties for Missing RMDs

Missing an RMD — or taking less than the required amount — used to trigger a 50% excise tax on the shortfall. SECURE 2.0 reduced this penalty significantly: beginning in 2023, the penalty is 25% of the amount not distributed, reduced to 10% if the mistake is corrected within two years through the IRS correction process.

Even at 25%, this is a substantial penalty on top of the ordinary income tax owed on the distribution. If you miss an RMD, file IRS Form 5329 and request a waiver — the IRS has historically been willing to waive the penalty for first-time mistakes with reasonable cause.

Roth IRAs and the RMD Exception

Roth IRAs are the notable exception to RMD rules — they have no required minimum distributions during the owner's lifetime. This is one of the most compelling reasons to build Roth balances through contributions or conversions before RMDs begin. Money in a Roth IRA can compound indefinitely and be passed to heirs (who will have their own distribution requirements under the 10-year rule for most non-spouse beneficiaries).

Note: Roth 401(k) accounts were subject to RMDs under prior law, but SECURE 2.0 eliminated Roth 401(k) RMDs beginning in 2024. Rolling a Roth 401(k) to a Roth IRA remains a valid strategy, particularly to consolidate accounts and simplify the distribution picture.

Qualified Charitable Distributions: The Best RMD Strategy

If you are charitably inclined and at least 70½ years old, a Qualified Charitable Distribution (QCD) is one of the most tax-efficient moves available. A QCD allows you to transfer up to $105,000 per year (indexed for inflation; $210,000 for a couple) directly from your IRA to a qualified charity. The distribution counts toward your RMD but is excluded from your taxable income entirely.

For retirees who don't need the RMD income, a QCD is superior to taking the distribution and donating the cash separately — because the QCD reduces your AGI, which can lower Medicare IRMAA surcharges, reduce the taxable portion of Social Security benefits, and keep you in a lower tax bracket. You cannot take a QCD from a 401(k) — you must first roll the 401(k) to a traditional IRA.

Reducing Future RMDs: Roth Conversions Before 73

The most effective long-term strategy for managing RMDs is to reduce pre-tax IRA and 401(k) balances before age 73 through systematic Roth conversions. By converting in the years between retirement and RMD age — often a period of lower income — you can move money from tax-deferred accounts to Roth at a relatively low tax rate, shrinking the future RMD base and potentially saving significantly in lifetime taxes.