What Is a Required Minimum Distribution (RMD)?

A Required Minimum Distribution (RMD) is the minimum amount the IRS forces you to withdraw each year from your tax-deferred retirement accounts — traditional IRAs, 401(k)s, 403(b)s, and similar plans. The government gave you a tax break when you contributed; RMDs are how they eventually collect that tax. Starting at age 73 (age 75 if born in 1960 or later, per SECURE 2.0), you must take these distributions whether you need the money or not — or face a 25% penalty on the amount you should have withdrawn.

Which Accounts Have RMDs?

• Traditional IRA — yes, starting at age 73
• 401(k), 403(b), 457(b) — yes, starting at age 73 (can delay if still working at the employer sponsoring the plan)
• SEP-IRA, SIMPLE IRA — yes
• Roth IRA — NO (a key advantage; Roth accounts have no RMDs during the owner's lifetime)
• Roth 401(k) — eliminated RMDs starting in 2024 (SECURE 2.0)
• Inherited IRAs — yes, under different rules depending on your relationship to the original owner

How Is Your RMD Calculated?

Each year, 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. At age 73, the factor is 26.5 — meaning you divide your balance by 26.5. A $500,000 IRA at age 73 requires an RMD of approximately $18,868. The factor decreases each year, requiring you to withdraw a larger percentage as you age.

The Tax Impact of RMDs

RMDs are taxed as ordinary income. A large RMD can push you into a higher tax bracket, increase your Medicare Part B and D premiums (IRMAA surcharges), make more of your Social Security benefits taxable, and reduce eligibility for certain deductions. This is why RMD planning matters — not just in the year you take it, but in the years before you turn 73.

Strategies to Reduce RMD Impact

• Roth conversions in your 60s — convert traditional IRA funds to Roth while you're in a lower bracket before Social Security and RMDs begin. Reduces future RMD size permanently.
• Qualified Charitable Distribution (QCD) — if you're 70½ or older, donate up to $105,000/year directly from your IRA to charity. It counts as your RMD but doesn't appear in your taxable income.
• Delay Social Security — combining delayed Social Security with early Roth conversions (ages 62-72) can significantly reduce lifetime taxes on retirement accounts.
• Work longer — if you're still employed at 73, you can delay 401(k) RMDs at your current employer (but not IRAs or old 401(k)s).

What Happens If You Miss an RMD?

The penalty for missing an RMD is 25% of the amount you should have taken (reduced to 10% if corrected within 2 years). The IRS does waive this penalty for reasonable errors if you take the missed distribution promptly. But this is not a penalty you want to trigger — the IRS takes RMD compliance seriously.

Inherited IRA RMD Rules

Under the SECURE Act (2019), most non-spouse beneficiaries must fully deplete inherited IRAs within 10 years. There is no annual RMD requirement within those 10 years for most beneficiaries — but the full balance must be distributed by December 31 of the 10th year after the original owner's death. Spouses have more flexibility: they can roll the inherited IRA into their own IRA and use normal RMD rules.