Required Minimum Distributions—better known as RMDs—are one of the most important retirement rules every senior should understand. They determine when you must start withdrawing money from your retirement accounts and how much you’re required to take each year. Missing an RMD, taking too little, or misunderstanding the rules can lead to large penalties.
This guide breaks RMDs down into simple, clear steps so you can feel confident managing your retirement income.
1. What Are Required Minimum Distributions?
RMDs are mandated withdrawals you must take from certain retirement accounts once you reach a specific age. The IRS creates these rules to ensure tax-deferred money is eventually taxed.
RMDs apply to:
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k)s
- 403(b)s
- Other employer retirement plans
RMDs do not apply to:
- Roth IRAs (during your lifetime)
- Roth 401(k)s (as of 2024, these no longer require RMDs while you’re alive)
2. When Do RMDs Start?
As of current IRS rules, RMDs begin at age 73.
Important notes:
- Your first RMD must be taken by April 1st of the year after you turn 73.
- Every RMD after that must be taken by December 31 each year.
- Delaying your first RMD may mean taking two withdrawals in the same year, which could increase your taxes.
3. How Is Your RMD Amount Calculated?
Your RMD is calculated using:
- Your account balance from December 31 of the previous year
- An IRS life expectancy table
Most people use the Uniform Lifetime Table, which spreads withdrawals over your expected lifespan.
The formula is:
Account Balance ÷ IRS Distribution Factor = RMD
Example:
If your IRA balance is $200,000 and your distribution factor is 26.5:
$200,000 ÷ 26.5 = $7,547 RMD
Most custodians calculate your RMD automatically, but it’s still important to verify it.
4. Which Accounts Require RMDs?
You must calculate an RMD for every traditional IRA you own, but you can take the total withdrawal from any one IRA.
For employer plans like a 401(k):
- RMDs must be taken from each account separately
- If you are still working and don’t own 5% or more of the company, you may delay RMDs from your current employer’s plan
5. What Happens If You Don’t Take Your RMD?
The IRS penalty for not taking an RMD used to be severe—but it has been reduced.
Current penalty:
- 25% tax on the amount you should have withdrawn
- Reduced to 10% if corrected quickly
You can usually fix missed RMDs by taking the distribution promptly and filing the necessary forms.
6. Can You Take More Than the RMD?
Yes.
You can always take more than your required minimum at any time—however, taking more will increase your taxable income for the year.
Taking only the RMD helps manage tax impact and preserve savings.
7. Strategies to Reduce Future RMDs
If you want smaller RMDs later, consider:
Roth Conversions
Moving money from a traditional IRA to a Roth IRA reduces future RMDs (because Roths don’t require them during your lifetime).
Qualified Charitable Distributions (QCDs)
If you are 70½ or older, you can donate up to $100,000 per year directly from your IRA to a charity.
This:
- Counts toward your RMD
- Avoids adding the money to your taxable income
This is one of the most tax-efficient strategies available.
Spreading withdrawals over multiple years
Taking small withdrawals before age 73 can reduce later RMD sizes.
Rebalancing investments
Reducing risk can help stabilize your account balance (and therefore future RMDs).
8. How RMDs Affect Your Taxes
RMDs are considered ordinary income, meaning they:
- Increase your taxable income
- Can raise Medicare premiums (IRMAA surcharges)
- May affect Social Security taxation
Planning ahead with a tax professional can lower your long-term tax burden.
9. What If You Don’t Need the Money?
Even if you don’t need your RMD for daily expenses, you can:
- Reinvest it into a taxable brokerage account
- Add it to savings
- Gift it to family
- Donate it through a QCD
- Use it for travel or personal goals
You must take the money out of the account, but you’re free to use it however you’d like.
Final Thoughts
Understanding RMDs helps protect your savings, avoid penalties, and manage taxes effectively in retirement. By planning ahead, using smart strategies, and knowing your deadlines, you can take your RMDs confidently and make the most of your retirement income.
RMDs don’t have to be complicated—they’re simply another part of maintaining a strong, secure retirement plan.