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.

What RMDs look like in dollars

The percentages start modest and climb with age. At 73, the divisor is about 26.5, meaning you must withdraw roughly 3.8% of the balance. By 80 it's about 4.95%, by 85 about 6.25%, and by 90 over 8%. On real balances, that adds up fast — and because the withdrawal is ordinary income, a large Traditional balance functions as a tax appointment you scheduled decades ago.

Mechanics and deadlines worth knowing

• Your first RMD can be delayed until April 1 of the year after you turn 73 — but that means taking two RMDs in one tax year, which usually backfires. Take the first one in its own year.
• All subsequent RMDs are due December 31. Don't cut it to the last week; custodian processing delays have caused real missed deadlines.
• Multiple IRAs: calculate each RMD separately, but you may take the total from any one IRA. Multiple 401(k)s: each plan's RMD must come from that plan.
• Still working at 73? Your current employer's 401(k) is exempt until you retire (if the plan allows and you own under 5% of the company) — IRAs are never exempt.
• RMDs cannot be rolled over or converted to Roth. You must take the RMD first; only amounts beyond it can be converted.
• The withdrawal doesn't have to be spent or sold: an in-kind transfer of shares to a taxable brokerage satisfies the RMD while keeping you invested.

Common RMD mistakes

• Treating the RMD as a spending mandate. It's a tax event, not a budget — reinvest what you don't need in a taxable account.
• Forgetting inherited-IRA RMDs, which follow different (and recently stricter) rules, including the 10-year drain requirement for most non-spouse heirs.
• Taking the QCD after the RMD: the first dollars out each year count toward the RMD, so charitable retirees should do QCDs first.
• Ignoring withholding. An RMD with no tax withheld can leave you underpaid for the year; most custodians let you withhold any percentage, which can even cover taxes on your other income.
• Waiting until 73 to think about it. The size of your RMD problem is set by choices — conversions, spending order, QCD plans — made in the decade before.

A simple projection you can do today

You don't need software to see your RMD future coming. Take your current Traditional balances, grow them at 5-6% a year to age 73, and divide the result by 26.5. A 60-year-old with $800,000 who keeps contributing modestly will plausibly reach 73 with about $1.6 million — a first RMD near $60,000, rising most years thereafter. Now add your projected Social Security and any pension: if the total comfortably exceeds what you expect to spend, you've found tomorrow's tax problem while it's still cheap to fix. That single napkin calculation, done once in your late 50s or early 60s, is what separates people who manage their RMDs from people who are managed by them.

The bottom line: RMDs are the tax code's collection notice for decades of deferral. The mechanics are easy to satisfy — automate a December distribution and check it annually. The strategy is what deserves attention in your 60s: conversions, withdrawal ordering, and charitable plans decide whether age-80 you faces a modest tax bill or a five-figure annual squeeze that was avoidable at half the rate ten years earlier.

A final perspective shift that helps some people: the RMD is not the government taking your money — it's the government finally collecting the tax you deferred, on a schedule you agreed to decades ago in exchange for all that compounding. Framed that way, the goal isn't to resent the distribution; it's to arrange your 60s so the collection happens at the lowest rates the brackets will ever offer you.