What Are Required Minimum Distributions?

If you’ve spent decades dutifully stuffing money into your 401(k) or traditional IRA, you might assume you get to decide when (or if) you ever touch it. The IRS has a different opinion. Enter
Required Minimum Distributions, better known as RMDsthe point where the government basically says, “Okay, your tax-deferred party has been fun. Now we’d like our cut.”

Understanding how RMDs work is crucial if you want to avoid ugly tax penalties, keep your retirement income predictable, and stay on the good side of the IRS. The good news: once you break down the rules into normal-people language, RMDs are more annoying than impossible.

What Is a Required Minimum Distribution (RMD)?

A Required Minimum Distribution is the minimum amount you must withdraw each year from certain retirement accounts once you reach a specific age. That age is currently
73 for most people, thanks to the SECURE 2.0 Act, which pushed it up from 72 for those who reach 72 after December 31, 2022.

RMDs exist because most tax-advantaged accountslike traditional IRAs and 401(k)slet you contribute pre-tax money and grow investments tax-deferred for years. At some point, Uncle Sam wants to start collecting income tax on that money. RMDs are the mechanism that forces those taxable withdrawals.

In short:

• RMDs are mandatory once you hit the required age (or inherit certain accounts).
• You must withdraw at least the IRS-required amount each year.
• If you don’t, there’s a penaltywhich used to be brutal, and is still painful.

Which Accounts Are Subject to RMDs?

RMD rules don’t apply to every account equally. Here’s a quick breakdown of where RMDs hit and where they don’t.

Accounts That Do Require RMDs

• Traditional IRAs
• Rollover IRAs
• SEP IRAs and SIMPLE IRAs
• 401(k)s, including solo 401(k)s
• 403(b) and 457(b) plans
• Most pre-tax employer retirement plans

If the account gave you a tax deduction up front and tax-deferred growth, assume the IRS will want RMDs later.

Accounts That Do Not Require RMDs While You’re Alive

• Roth IRAs – No lifetime RMDs for the original owner.
• Roth 401(k)s and Roth 403(b)s – Starting with tax years after 2023, SECURE 2.0 eliminated lifetime RMDs for designated Roth accounts in employer plans.

Important catch: while your own Roth IRA doesn’t have RMDs during your lifetime, inherited Roth accounts can have distribution rules. Beneficiaries may still need to empty the account within 10 years, depending on their status and when the original owner died.

When Do RMDs Start?

This is where many people get tripped up, because the starting age has changed multiple times.

The Current RMD Age

• Age 73 is the current RMD age for most people for tax years 2023 and later if you were born after December 31, 1950 and before January 1, 1959.
• The age is scheduled to rise to 75 in 2033 for people born in 1960 or later.

Your first RMD is due by:

• April 1 of the year after the year you reach your RMD age (73 under current rules).

For example, if you turn 73 in 2025, you can:

• Take your first RMD anytime in 2025, or
• Delay it up to April 1, 2026.

But there’s a catch: if you delay, you’ll have to take two RMDs in the same calendar yearone for the prior year (by April 1) and one for the current year (by December 31). That can push your taxable income higher and potentially bump you into a higher tax bracket.

The “Still Working” Exception

If you’re still working past age 73, you may be able to delay RMDs from your current employer’s 401(k) or similar plan until you retire, as long as:

• You don’t own more than 5% of the company, and
• The plan allows this “still working” exception.

This exception does not apply to IRAs. Traditional IRAs still require RMDs once you reach the applicable age, whether you’re retired or not.

How Are RMDs Calculated?

The math behind RMDs is not as bad as it looksthink middle-school division, not rocket science.

The Basic Formula

For most account owners, the IRS uses the Uniform Lifetime Table. The general formula is:

RMD = (Account balance on December 31 of last year) ÷ (Life expectancy factor)

The life expectancy factor is taken from the IRS table based on your age. Financial firms like Fidelity, Vanguard, and others publish easy-to-use versions of this table and online calculators.

An Example RMD Calculation

Suppose:

• You are 73 this year.
• Your traditional IRA had a balance of $300,000 on December 31 of last year.
• The IRS life expectancy factor at age 73 (from the Uniform Lifetime Table) is, for example, 26.5 (illustrative figure).

Your RMD would be:

$300,000 ÷ 26.5 ≈ $11,321

That’s the minimum you must withdraw this year from that IRA. If you have multiple IRAs, you generally:

• Calculate the RMD separately for each IRA, but
• You can often take the total RMD amount from any combination of those IRA accounts.

Workplace plans like 401(k)s are different: you typically must take the RMD from each plan separately.

Deadlines and Logistics: How and When to Take Your RMD

Once you’re in RMD territory, the yearly routine looks like this:

• By early in the year: Your financial institution usually sends an RMD notice and may even calculate the amount for you.
• By December 31: You must withdraw that year’s RMD (except your very first, which can be delayed to April 1 of the next year).
• Method of withdrawal: You can take the RMD as a lump sum, monthly payments, or a few chunks spread through the year.
• In cash or in kind: You can sell investments and withdraw cash, or transfer investments “in kind” to a taxable brokerage account, as long as the value satisfies the RMD amount.

RMDs from traditional accounts are generally taxed as ordinary income. You can ask the custodian to withhold federal (and sometimes state) taxes from the distribution to avoid a nasty surprise at tax time.

What Happens If You Don’t Take an RMD?

Here’s where procrastination gets expensive.

If you fail to take your full RMD on time, the IRS can impose an excise tax on the amount you should have withdrawn but didn’t. Historically, that penalty was a brutal 50%. Thanks to SECURE 2.0, starting in 2023 the penalty is:​

• 25% of the amount not withdrawn, or
• 10% if you correct the error in a timely manner (generally within two years and file the appropriate form).

Example: If your RMD was $12,000 and you only withdrew $2,000, you’re short by $10,000. A 25% penalty would be $2,500on top of the regular income tax you still owe when you eventually take that money out.

The IRS may waive the penalty if:

• The shortfall was due to reasonable error, and
• You’re taking steps to correct it.

Typically, you file Form 5329 and attach a letter explaining what happened. A tax pro can be extremely helpful here.

Special Case: Inherited IRAs and the 10-Year Rule

Inherited retirement accounts have their own RMD universe, especially after the original SECURE Act in 2019 and subsequent IRS guidance.

For many non-spouse beneficiaries of accounts inherited after 2019, the general rule is:

• The inherited account must usually be emptied by the end of the 10th year after the original owner’s death.

Whether you also must take annual RMDs during years 1–9 depends on whether the original owner had already started RMDs and your beneficiary status. The rules are complex and still evolving, with IRS relief granted for some missed inherited RMDs in recent years.

Bottom line: if you inherit a retirement account, especially an IRA, don’t guess. Talk to a tax advisor or financial planner who’s up to date on the latest IRS guidance.

Strategies to Manage and Minimize RMD Pain

You can’t escape RMDs on pre-tax accounts forever, but you can make them less painful and more strategic.

1. Consider Roth Conversions Before RMD Age

One popular move is to convert part of a traditional IRA to a Roth IRA in your 60s, especially in lower-income years before Social Security and RMDs kick in. You’ll pay tax on the conversion now, but:

• Future growth in the Roth is tax-free (if rules are met).
• Roth IRAs don’t have lifetime RMDs for the original owner.
• You may shrink the pre-tax balance that will eventually generate RMDs.

The trade-off is paying some tax sooner to potentially reduce larger RMD-driven taxes later.

2. Coordinate RMDs With Your Tax Bracket

Because RMDs add to your taxable income, they can:

• Push you into a higher tax bracket,
• Increase the portion of Social Security that’s taxable, and
• Raise Medicare Part B and D premiums via IRMAA surcharges.

Some retirees intentionally “smooth out” their income over timetaking controlled withdrawals or Roth conversions before RMD age to avoid giant required distributions later.

3. Use Qualified Charitable Distributions (QCDs)

If you’re charitably inclined and at least age 70½, you can direct up to a certain annual amount (currently up to $100,000, indexed in future years) from your IRA directly to a qualified charity as a Qualified Charitable Distribution. A QCD:

• Counts toward your RMD (once you’re of RMD age), and
• Is excluded from your taxable income.

You don’t get a separate charitable deduction for it, but lowering your adjusted gross income can help with other tax items.

4. Automate and Calendar Your RMDs

To avoid missed deadlines and penalties:

• Ask your custodian to automatically distribute your RMD on a certain date or monthly.
• Set calendar reminders in the fall to review your RMD status.
• Coordinate with your tax preparer or advisor before year-end.

The less your RMDs rely on memory, the safer you’ll be.

Real-World RMD Experiences: What Retirees Wish They’d Known

Rules and tables are great, but real life is rarely as tidy as an IRS publication. Here are some common experiences, patterns, and “I wish I’d known” moments that surface when people start dealing with required minimum distributions.

“The First RMD Caught Me Off Guard”

Many new retirees say they knew RMDs were a thing, but didn’t fully appreciate how they’d affect their cash flow and taxes until that first letter or email from their custodian showed up. The amount can feel surprisingly large, especially if:

• Your investments had a strong year and the balance spiked.
• You didn’t need that much income to live on.
• You hold multiple accounts and never looked at the combined total.

One common experience: a retiree who lived frugally and assumed they could let their savings sit quietly realized their first RMD pushed them into a higher tax bracket and increased their Medicare premiums. Suddenly, “I’ll just let it grow” wasn’t an option anymore.

“I Didn’t Realize I Could Take RMDs From Just One IRA”

People with multiple IRAs sometimes think they must take a separate RMD from each account. In reality, you can usually:

• Calculate each IRA’s RMD amount, then
• Withdraw the total combined RMD from one or a few of them.

Retirees often use this flexibility to:

• Drain a higher-fee or underperforming IRA first,
• Consolidate accounts over time to simplify life, or
• Leave a particularly tax-efficient or well-allocated IRA invested longer.

The “aha” moment tends to be: “Oh, I can use RMDs as a cleanup tool, not just a random withdrawal.”

“Year-End RMDs Made Me Nervous”

Another common pattern: waiting until late December to take RMDs. On paper, it seems smartkeep the money invested as long as possible. In practice, it can be stressful if:

• Markets are volatile and you’re trying to time a decent selling point.
• Your custodian has holiday processing delays.
• You forget to hit “submit” on that distribution request.

Many retirees eventually move to a mid-year or quarterly RMD schedule. They still keep money invested for a good chunk of the year, but they’re not sweating a December 30th deadline if something goes wrong.

“RMDs Changed How I Thought About My Money”

RMDs can feel like an annoying obligation, but some retirees find a silver lining: they’re a nudge to actually use the savings they spent years building.

People often describe a mindset shift:

• Instead of hoarding every dollar “just in case,” they build a spending plan.
• They earmark part of the RMD for travel, hobbies, or gifts to family.
• They use what’s left to top off an emergency fund or invest in a taxable account with a more flexible strategy.

One retiree joked, “If the IRS is going to make me take the money out anyway, I might as well enjoy some of it instead of just sending all of it to taxes.”

“I Wish I’d Done More Planning in My 60s”

A very common regret: not doing enough tax planning in the decade before RMDs.

People who retired in their early to mid-60s often had several “light income” years where they:

• Weren’t yet taking Social Security, and
• Had little or no earned income.

Those years can be an ideal window for:

• Partial Roth conversions,
• Strategic withdrawals from pre-tax accounts to fill lower tax brackets, and
• Restructuring investments before RMDs start.

Many people only realize this after they hit RMD age and discover their tax bill is higher than expected. The lesson: the decade before RMDs can be just as important as the decade after.

“At the End of the Day, It’s Manageable”

The final takeaway from many real-world stories is surprisingly optimistic: once people build a routine, RMDs become just another annual to-do item, not a source of constant panic.

The retirees who feel most confident about RMDs tend to:

• Keep their accounts consolidated and organized.
• Use automation for at least part of their distributions.
• Check in with a tax or financial professional every year or two.
• View RMDs as part of a broader retirement income plannot an isolated annoyance.

RMDs might be mandatory, but how you weave them into your financial life is totally up to you. With a bit of planning and a calendar reminder (or three), they become much less scary and a lot more predictable.

Bottom Line

Required Minimum Distributions are the IRS’s way of ending the “never pay tax” fantasy on pre-tax retirement accounts. If you have traditional IRAs, 401(k)s, or similar plans, RMDs will eventually be part of your retirement reality.

The keys to handling them well are:

• Knowing when they start and what accounts they apply to,
• Understanding how they’re calculated and taxed,
• Avoiding penalties by meeting deadlines, and
• Using smart strategieslike Roth conversions, QCDs, and tax-bracket managementto integrate RMDs into your bigger retirement plan.

You can’t opt out of RMDs, but you can absolutely control how gracefully you deal with them. That’s where good information, a bit of planning, and sometimes a helpful professional can make all the difference.

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