What Are Required Minimum Distributions (RMDs)?

For most of your working life, the goal was simple: put money into your retirement accounts and let it grow. The IRS was happy to wait.

That changes when you reach age 73. At that point, the government requires you to start taking money out of certain retirement accounts every year — whether you need the income or not. These mandatory withdrawals are called Required Minimum Distributions, or RMDs.

Miss one, and the penalty is steep. Understanding how RMDs work before they arrive is one of the more important things you can do in the years leading up to and just after retirement.

Why the IRS Requires Them

Traditional retirement accounts — like a traditional IRA or 401(k) — are funded with pre-tax dollars. That means you got a tax break when you contributed, but you haven't paid taxes on that money yet. The IRS has been patient, allowing the account to grow tax-deferred for decades. RMDs are how the government eventually collects.

By requiring distributions starting at age 73, the IRS ensures that money doesn't sit in a tax-sheltered account indefinitely. Each distribution you take gets added to your taxable income for that year.

Which Accounts Are Affected

RMDs apply to most tax-deferred retirement accounts, including traditional IRAs, rollover IRAs, SEP IRAs (Simplified Employee Pension plans), SIMPLE IRAs (Savings Incentive Match Plans for Employees), 401(k) plans, 403(b) plans, and 457(b) governmental plans.

Roth IRAs are not subject to RMDs during the account owner's lifetime. This is one of the key advantages of Roth accounts — the money can stay invested as long as you like. Starting in 2024, Roth 401(k) accounts were also exempted from RMDs while the owner is alive, bringing them in line with Roth IRAs.

If you have multiple traditional IRAs, the IRS calculates an RMD for each one separately — but you can add those amounts together and take the total from whichever IRA or combination of IRAs you choose. Workplace plans like 401(k)s are handled differently: each plan requires its own distribution.

When You Have to Start

Under current law, you must begin taking RMDs in the year you turn 73. The age was raised from 72 to 73 by the SECURE Act 2.0, which passed in 2022. It is scheduled to rise again to 75 in 2033 for people born in 1960 or later.

There is one exception worth knowing about: if you are still working and participating in your employer's retirement plan, you may be able to delay RMDs from that specific plan until you actually retire — as long as you do not own 5% or more of the business. This exception does not apply to IRAs, regardless of whether you're still working.

Your first RMD has a special deadline. Normally, the deadline to take your RMD is December 31 of each year. But for the very first year you're required to take one, you can delay until April 1 of the following year. This sounds helpful, but be careful: if you delay your first RMD to April 1, you'll be taking two distributions in that calendar year — the one you delayed plus the one due by December 31 of the same year. Two distributions mean more taxable income in a single year, which could push you into a higher tax bracket or affect other income-related calculations.

For most people, it makes more sense to take the first RMD in the year they turn 73 rather than delay it.

How the Amount Is Calculated

Your RMD is not a fixed dollar amount. It changes every year based on two things: your account balance and your age.

The calculation uses your account balance on December 31 of the prior year, divided by a life expectancy factor from IRS tables. As you get older, the life expectancy factor gets smaller, which means the required withdrawal percentage increases each year.

Example: If your traditional IRA had a balance of $400,000 on December 31 of last year, and the IRS life expectancy factor for your age is 26.5, your RMD for this year would be approximately $15,094.

The IRS publishes the life expectancy tables in Publication 590-B, and offers free worksheets to help you calculate your RMD at IRS.gov. Many IRA custodians — the financial institutions that hold your accounts — will also calculate your RMD for you and send reminders as the deadline approaches.

The Penalty for Missing an RMD

If you don't take your full RMD by the deadline, the IRS imposes an excise tax on the amount you failed to withdraw. The penalty is 25% of the shortfall — meaning if you were supposed to take out $15,000 and didn't take anything, you owe a $3,750 penalty on top of the regular income tax when you eventually do take the distribution.

That said, the SECURE Act 2.0 reduced this from the previous 50% penalty, and added a correction window: if you take the missed distribution and correct the failure within two years, the excise tax drops to 10%.

You can also request a waiver from the IRS if the shortfall was due to reasonable error. To do so, file Form 5329 with an explanation. The IRS has the authority to waive the penalty at its discretion, but there's no guarantee.

The best approach is simply not to miss the deadline in the first place. Set a reminder well before December 31 each year.

One Strategy Worth Knowing: Qualified Charitable Distributions

If you're 70½ or older and charitably inclined, there's a provision called a Qualified Charitable Distribution, or QCD, that can work in your favor. A QCD lets you transfer money directly from your IRA to a qualified charity — up to an annual limit set by the IRS — and that amount counts toward your RMD for the year without being added to your taxable income.

This means you satisfy the RMD requirement without increasing your adjusted gross income, which can have positive ripple effects on your taxes, Medicare premiums, and other income-based thresholds. QCDs cannot come from 401(k) or other employer plans — only IRAs. For details, see IRS Publication 590-B.

The One Thing to Do Right Now

If you're within five years of turning 73, get a clear picture of which accounts will be subject to RMDs and roughly how large those distributions will be. Your account custodian can often give you a projection.

Knowing your approximate RMD amounts ahead of time helps you plan for the tax impact — and opens up conversations about strategies like Roth conversions before the RMDs begin.