Required Minimum Distributions

Every year you contributed to your 401(k), you got a small round of applause. Your employer matched. Your tax bill dropped. Financial media told you to save more, max it out, let it compound. What nobody mentioned, at any point during those decades of encouragement, is that the IRS was keeping a tab. The money in your tax-deferred accounts has never been taxed. The government doesn’t forget.

Required minimum distributions are the mechanism. Starting at age 73, the IRS forces you to withdraw a minimum amount from your traditional retirement accounts every year, whether you need the money or not. Each withdrawal gets taxed as ordinary income. The amount grows as a percentage of your balance every year you age. Miss a withdrawal and the penalty is 25% of what you should have taken out.

The accumulation phase taught you to save. Nobody teaches the drawdown phase. RMDs sit at the center of that gap, and they punish people who don’t plan for them.

What RMDs Are and Which Accounts They Hit

An RMD is the minimum amount you must withdraw from a tax-deferred retirement account each year once you reach the required age. You can always take more. You cannot take less.

The IRS applies RMDs to every account type where you got a tax break going in: traditional IRAs, 401(k)s, 403(b)s, 457(b)s, SEP IRAs, and SIMPLE IRAs. If you deducted your contributions or deferred taxes on employer contributions, the bill comes due through RMDs.

Roth IRAs are exempt. You already paid taxes on Roth contributions, so the IRS doesn’t force withdrawals during your lifetime. This is the single most important distinction in retirement tax planning.

Roth 401(k)s are now also exempt. Before SECURE 2.0, Roth 401(k)s were subject to RMDs even though the money had already been taxed. That rule never made sense and was eliminated effective 2024. If you have a Roth 401(k), you no longer need to roll it into a Roth IRA to avoid RMDs.

The current RMD starting age is 73 (set by SECURE 2.0 in 2023). It rises to 75 beginning in 2033. If you’re 70 today, you have until 2029. If you’re 60, you have until 2041. Those years between retirement and your first RMD are the planning window that matters most.

The Math: How to Calculate Your RMD

The formula is simple. Divide your account balance on December 31 of the prior year by the IRS life expectancy factor for your current age. The result is your RMD.

The life expectancy factor comes from the IRS Uniform Lifetime Table. It shrinks every year, which means the percentage of your account you must withdraw grows every year.

Age	Life Expectancy Factor	Approximate RMD %
73	26.5	3.8%
75	24.6	4.1%
78	22.0	4.5%
80	20.2	5.0%
85	16.0	6.3%
90	12.2	8.2%

A worked example: Linda is 73 and has $800,000 in a traditional IRA as of December 31. Her RMD is $800,000 divided by 26.5, which equals $30,189. That $30,189 is taxed as ordinary income, stacked on top of everything else she earns that year.

At 80, if Linda’s account has grown to $850,000 despite withdrawals, her RMD rises to $850,000 divided by 20.2, or $42,079. The percentage climbs even if the balance stays flat.

You can take your RMD in a lump sum or spread it across multiple withdrawals throughout the year, as long as the total meets the minimum by the deadline. If you have multiple traditional IRAs, you calculate the RMD for each account separately but can take the total from any one IRA or combination of IRAs. A 401(k) is different. Each 401(k) RMD must come from that specific 401(k). You cannot pull a 401(k) RMD from an IRA.

The First-Year Trap

Your first RMD has a special rule that sounds generous and is actually dangerous. You can delay your first RMD until April 1 of the year after you turn 73. Every subsequent RMD is due by December 31.

The trap: if you delay that first RMD to April 1, you must also take your second RMD by December 31 of the same year. Two full RMDs in one calendar year, both taxed as ordinary income.

Back to Linda. She turns 73 in 2029 and delays her first RMD to March 2030 (before the April 1 deadline). Her first RMD (for 2029) is $30,189. Her second RMD (for 2030) is due by December 31, 2030. If her balance grew to $810,000, that second RMD is $810,000 divided by 25.5 (the factor at age 74), or $31,765. In 2030, Linda has $61,954 in RMD income on top of her Social Security and any other income. That’s enough to jump a tax bracket or two, trigger Medicare surcharges, and make more of her Social Security taxable.

Taking the first RMD in the year you turn 73 avoids the double-up entirely. Unless you have a specific, calculated reason to delay, don’t.

The Tax Cascade

The RMD itself is not the problem. The cascade it triggers is.

RMDs are taxed as ordinary income. They stack on top of Social Security benefits, pension payments, part-time wages, and investment income. The combined total determines your tax bracket, your Medicare premiums, and how much of your Social Security gets taxed. One number affects three different systems.

Tax brackets. A single retiree with $45,000 in Social Security and a $35,000 RMD has $80,000 in gross income (before deductions). Add a $20,000 RMD increase from a growing account balance and she’s at $100,000, pushing into the 22% bracket. The marginal rate on that last $20,000 jumped from 12% to 22%.

IRMAA. Medicare charges higher premiums to people above certain income thresholds. The thresholds for 2025 start at $103,000 for individuals and $206,000 for couples filing jointly. The income used is your modified adjusted gross income from two years prior. A large RMD in 2028 increases your Medicare premiums in 2030. A single retiree with $98,000 in income who takes a $10,000 larger RMD than expected crosses the $103,000 threshold and pays about $74 more per month in Part B premiums. That’s $888 per year in extra healthcare costs triggered by a few thousand dollars of income that could have been avoided with better planning. For details on how IRMAA tiers work, see Medicare and Medicaid.

Social Security taxation. Up to 85% of your Social Security benefits become taxable once your “combined income” (adjusted gross income plus nontaxable interest plus half your Social Security) exceeds $34,000 for individuals or $44,000 for couples. RMDs count toward that calculation. A retiree whose Social Security was barely taxable can cross the 85% threshold with a single RMD.

These three effects compound. A larger RMD pushes you into a higher bracket, triggers IRMAA surcharges, and makes more of your Social Security taxable. The total cost can exceed the tax on the RMD itself.

Strategies That Actually Help

The best time to deal with RMDs is before they start. The years between retirement and age 73 are the planning window.

Roth conversions do the heaviest lifting. Convert traditional IRA money to a Roth IRA before RMDs begin, ideally during low-income years in early retirement. You pay income tax on the converted amount now, at whatever rate applies. The money then grows tax-free in the Roth and is never subject to RMDs. A retiree who converts $50,000 per year from ages 62 to 72 moves $550,000 out of the RMD system. That’s real money. At age 80, it means roughly $27,000 less in forced annual income. The tax paid during conversion is almost always lower than what would have been paid over decades of rising RMDs.

The key is staying within a target bracket during conversions. Convert just enough to fill the 12% or 22% bracket each year without spilling into the next one. This requires knowing your income sources and running the numbers annually. A tax professional or a Roth conversion calculator can help you model the math for your situation.

Qualified Charitable Distributions (QCDs) let you donate up to $105,000 per year directly from your IRA to a qualifying charity. The donation counts toward your RMD but does not count as taxable income. A retiree who was donating $10,000 per year to charity from after-tax money can instead route that donation through a QCD, satisfying a third of a $30,000 RMD while keeping $10,000 off their tax return. QCDs are available starting at age 70 and a half, before RMDs even begin.

Spend tax-deferred money first. Conventional wisdom says to let tax-deferred accounts grow as long as possible. For people with large balances, this is backwards. Drawing down traditional accounts in your 60s (while replacing living expenses with those withdrawals instead of Roth or taxable accounts) reduces the balance that RMDs are calculated on. Smaller balance at 73 means smaller forced withdrawals for the rest of your life.

Where This Breaks

Three situations trip people up every year.

Inherited IRAs follow different timelines. Under the SECURE Act of 2019, most non-spouse beneficiaries must empty an inherited IRA within 10 years. No annual RMDs are required, but the entire balance must be distributed by the end of the tenth year. Spouse beneficiaries can roll the account into their own IRA and follow the standard rules. The 10-year clock catches people off guard because the final-year distribution can be enormous if they waited.

The still-working exception lets you delay RMDs from your current employer’s 401(k) if you’re still employed there past age 73 and own 5% or less of the company. This only applies to the plan at your current employer. It does not apply to IRAs or old 401(k)s from previous employers. A 74-year-old still working at a large company can skip RMDs on that company’s 401(k) while still being required to take RMDs from every other tax-deferred account they own.

Accounts people forget. Old 401(k)s from employers you left 20 years ago still generate RMD obligations. An inherited IRA from a parent still has a distribution clock ticking. The IRS knows about these accounts. Your custodian is required to report your RMD amount to the IRS every year. Missing an RMD because you forgot about an account triggers the same 25% penalty as deliberately skipping one. If you have scattered accounts, consolidating them into a single IRA before RMDs begin simplifies everything.

The penalty for a missed RMD is 25% of the shortfall, reduced to 10% if you correct it within two years. That’s better than the old 50% penalty, but 25% of a $40,000 missed RMD is still $10,000 you didn’t need to lose.

What’s Next

RMDs don’t exist in isolation. When you start Social Security determines how much income stacks on top of your RMDs. Claiming too early or too late changes your tax picture for the rest of your life.

Social Security Timing covers when to claim and why the default choice costs most people money.