Required Minimum Distributions (RMDs)

Traditional retirement accounts let you defer taxes for decades, but the IRS doesn't let you defer forever. Required Minimum Distributions kick in starting at age 73 (rising to 75 for younger workers) — a minimum percentage of your Traditional IRA or 401(k) that you must withdraw each year and pay tax on. Miss a distribution and the penalty is steep.

What's subject to RMDs

• Traditional IRAs, SEP IRAs, SIMPLE IRAs: yes.
• Traditional 401(k), 403(b), 457(b): yes.
• Roth IRAs: no RMDs during the original owner's lifetime. One of their biggest advantages.
• Roth 401(k)s: starting in 2024, no longer subject to RMDs for the original owner.
• Inherited retirement accounts: usually yes, with different rules depending on the relationship.

How the amount is calculated

Each year, you divide your account balance as of December 31 of the prior year by a life-expectancy factor from the IRS Uniform Lifetime Table. Your brokerage will calculate this for you automatically and tell you the required amount — but you're still the one responsible for actually taking the distribution.

Planning strategies

• Roth conversions in your 60s (before RMD age) shift money from Traditional to Roth, shrinking future RMDs.
• Qualified Charitable Distributions (QCDs) let you count charitable donations toward your RMD without taking the income.
• Delaying Social Security to 70 while using RMDs to fund living expenses can be a smart tax move.
• Staying aware of your RMDs prevents falling off a tax cliff — large RMDs can push you into higher brackets, IRMAA surcharges, and higher Social Security taxation.