What Is an RMD?
A Required Minimum Distribution (RMD) is the minimum amount the IRS requires you to withdraw from certain retirement accounts each year, beginning at age 73. The withdrawn amount is treated as ordinary income and taxed at your marginal rate.
The rule exists because traditional 401(k)s, Traditional IRAs, and similar accounts are funded with pre-tax dollars that have never been taxed. Congress allows these funds to grow tax-deferred for decades, but eventually requires distributions so the government can collect the income tax it deferred.
RMDs are calculated separately for each account type. You must take them from each account or aggregate them in certain circumstances (see below).
Which Accounts Require RMDs?
- Traditional IRA
- 401(k) — Traditional
- 403(b)
- 457(b) — government plans
- SEP IRA
- SIMPLE IRA
- Inherited IRAs (most non-spouse beneficiaries)
- Roth IRA (owner's lifetime)
- Roth 401(k) (starting 2024, per SECURE 2.0)
- Roth 403(b) (starting 2024)
- 529 college savings plans
- HSA (Health Savings Account)
- Taxable brokerage accounts
If you are still employed and do not own more than 5% of the company, you may be able to delay RMDs from your current employer's 401(k) until you retire — even past age 73. This exception does not apply to IRAs or old 401(k)s from previous employers.
RMD Start Age: 73 (and 75 in 2033)
SECURE 2.0 (enacted December 2022) changed the RMD starting age twice:
First RMD Deadline — The April 1 Grace Period
Your first RMD can be delayed until April 1 of the year after you turn 73 (your "Required Beginning Date"). However, if you use this grace period, you must take two RMDs in that first calendar year — one by April 1 and a second by December 31. Taking two RMDs in one year can push you into a higher tax bracket. Many advisors recommend taking the first RMD in the year you turn 73 to avoid this double-distribution problem.
The SECURE Act (2019) eliminated the "stretch IRA" for most non-spouse beneficiaries, replacing it with a 10-year rule: the entire inherited account must be distributed within 10 years of the original owner's death. Additionally, if the original owner had started taking RMDs, most non-spouse beneficiaries must also take annual RMDs during those 10 years. Spousal beneficiaries have more options, including treating the IRA as their own.
How to Calculate Your RMD
The RMD formula uses two inputs:
- Account balance: The December 31 balance of your retirement account in the prior year
- Distribution period (life expectancy factor): A number from the IRS Uniform Lifetime Table based on your age
RMD = December 31 Balance ÷ Distribution Period Factor
IRA balance on December 31 of prior year: $500,000
IRS Uniform Lifetime Table factor at age 75: 24.6
RMD = $500,000 ÷ 24.6 = $20,325
IRS Uniform Lifetime Table (Selected Ages)
| Age | Life Expectancy Factor | RMD % of Balance | RMD on $500,000 |
|---|---|---|---|
| 73 | 26.5 | 3.77% | $18,868 |
| 74 | 25.5 | 3.92% | $19,608 |
| 75 | 24.6 | 4.07% | $20,325 |
| 76 | 23.7 | 4.22% | $21,097 |
| 78 | 21.9 | 4.57% | $22,831 |
| 80 | 20.2 | 4.95% | $24,752 |
| 85 | 16.0 | 6.25% | $31,250 |
| 90 | 12.2 | 8.20% | $40,984 |
| 95 | 8.9 | 11.24% | $56,180 |
If you have multiple Traditional IRAs, you calculate the RMD separately for each account — but you can take the total combined RMD from any one (or combination) of your IRAs. You cannot, however, use an IRA distribution to satisfy a 401(k) RMD. Each 401(k) RMD must be taken separately from that specific plan.
The 25% Penalty for Missing an RMD
Failing to take your full RMD by the deadline triggers one of the steepest IRS penalties: a 25% excise tax on the amount you should have withdrawn but didn't. SECURE 2.0 reduced this from the prior 50% penalty rate effective for tax years after December 29, 2022.
| Scenario | Penalty Rate | Example (RMD shortfall: $20,000) |
|---|---|---|
| Standard missed RMD | 25% | $5,000 excise tax |
| Corrected within 2-year window (self-correction or plan correction) | 10% | $2,000 excise tax |
| IRS waives penalty (reasonable cause, Form 5329) | 0% | $0 if approved |
To correct a missed RMD, take the distribution as soon as you realize the mistake, file IRS Form 5329 (Additional Taxes on Qualified Plans) with a statement of reasonable cause, and request a waiver. The IRS often waives the penalty for first-time mistakes.
Qualified Charitable Distributions (QCDs)
A Qualified Charitable Distribution (QCD) is a direct transfer from your IRA to a qualified 501(c)(3) charity, up to $105,000 per year in 2026 (indexed for inflation). QCDs are the most powerful RMD tax tool for charitably inclined retirees.
Why QCDs Are So Valuable
The conventional approach — take the RMD as income, then donate to charity and itemize the deduction — doesn't work for most retirees because:
- The RMD is added to your adjusted gross income (AGI) before the deduction, potentially triggering Medicare premium surcharges (IRMAA) and Social Security taxation
- Most retirees take the standard deduction and receive no tax benefit from charitable donations at all
A QCD bypasses these problems entirely. The distribution never appears in your AGI — it's simply excluded. It satisfies your RMD obligation without triggering income tax on the distribution.
RMD taxable income: +$20,000 (at 22% bracket = $4,400 tax)
Charitable deduction (if itemizing): −$20,000
Tax saved: $0 (most retirees use standard deduction)
QCD approach:
RMD satisfied via QCD: $20,000
Taxable income added to AGI: $0
Tax saved vs. conventional: $4,400 (at 22% bracket)
• You must be at least age 70½ to make a QCD (not 73)
• QCDs can only be made from IRAs (not 401(k)s, though rolling over to an IRA first is possible)
• The transfer must go directly from the IRA custodian to the charity — you can't receive the funds and forward them yourself
• Donor-advised funds and private foundations do not qualify for QCDs
• Starting in 2024, a one-time $53,000 QCD to a charitable remainder trust or charitable gift annuity is allowed
RMD Reduction Strategies
If your Traditional IRA/401(k) balance is large, RMDs can create significant tax problems — large RMDs pile on top of Social Security and other income, pushing you into higher brackets, triggering Medicare IRMAA surcharges, and reducing the deductibility of medical expenses. Here are strategies to reduce future RMDs:
1. Roth Conversions Before Age 73
Converting Traditional IRA funds to Roth IRA before RMDs begin reduces the pre-tax balance subject to future RMDs. Each dollar converted reduces future RMDs — permanently. The ideal window is often ages 60–72, when you may have lower income (retired but not yet taking Social Security or RMDs). Converting in years when you're in the 22% or 24% bracket can be very tax-efficient.
2. Qualified Charitable Distributions (QCDs)
As described above, QCDs directly satisfy your RMD without adding to taxable income. If you plan to give to charity anyway, QCDs are almost always the superior approach vs. donating after taking the RMD.
3. Still-Working Exception
If you're still employed and don't own more than 5% of the company, delay RMDs from your current employer's 401(k) until you retire. Roll other retirement accounts into your current 401(k) if the plan allows it to keep more funds in the RMD-free zone.
4. Invest in a Qualified Longevity Annuity Contract (QLAC)
You can use up to $200,000 (2024 limit) of your IRA/401(k) balance to purchase a QLAC — a deferred income annuity that starts payouts at a future age (up to 85). Funds inside a QLAC are excluded from the RMD calculation until payments begin, effectively deferring RMDs on that portion for years.
5. Coordinate Distributions With Spouse
Married couples can coordinate the timing of IRA distributions, Social Security claiming, and conversions between spouses to smooth taxable income across both lives and minimize lifetime tax exposure.
SECURE 2.0 eliminated RMDs from Roth 401(k)s starting in 2024. If you have a traditional 401(k) and your plan offers a Roth option, converting ongoing contributions to Roth can reduce future RMD exposure without triggering a taxable Roth conversion event. New contributions go to Roth; old pre-tax funds stay and eventually become RMDs.