Understanding Required Minimum Distributions (RMDs)

If you have a traditional IRA, 401(k), or other pre-tax retirement account, the IRS eventually requires you to start withdrawing money — whether you need it or not. These mandatory withdrawals are called Required Minimum Distributions (RMDs).

When Do RMDs Start?

Under the SECURE Act 2.0 (2022), RMDs now begin at age 73 (previously 72, and before that 70½). If you turn 73 in 2024, your first RMD is due by April 1, 2025. After that, RMDs must be taken by December 31 each year. Note: taking two RMDs in one year can push you into a higher tax bracket.

How Is the RMD Amount Calculated?

The IRS uses your account balance as of December 31 of the prior year divided by a life expectancy factor from the Uniform Lifetime Table. As you age, the factor decreases, requiring you to withdraw a larger percentage of your balance each year.

What Accounts Are Subject to RMDs?

• Traditional IRAs
• 401(k) plans
• 403(b) plans
• 457(b) plans
• SEP and SIMPLE IRAs

Roth IRAs are NOT subject to RMDs during the owner's lifetime — a major planning advantage.

The Penalty for Missing an RMD

The excise tax for missing an RMD is 25% of the amount you should have withdrawn — reduced to 10% if you correct the error within two years. This is one of the steepest IRS penalties, so careful planning is essential.

RMD Planning Strategies

Roth conversions: Converting traditional IRA funds to Roth before age 73 reduces your future RMD burden while potentially lowering lifetime taxes.

Qualified Charitable Distributions (QCDs):If you're 70½ or older, you can donate up to $105,000 directly from your IRA to charity — it counts toward your RMD but is excluded from taxable income.

Disclaimer: This article is for educational purposes only. Consult a tax professional for advice specific to your situation.