RMD stands for Required Minimum Distribution. It’s the minimum amount of money you must withdraw from certain retirement accounts each year once you reach a specific age. The IRS requires these withdrawals because contributions to accounts like traditional IRAs and 401(k)s were tax-deferred going in, and the government eventually wants its share of tax revenue on that money.
How RMDs Work
You generally must start taking RMDs when you reach age 73. This applies to traditional IRAs, SEP IRAs, SIMPLE IRAs, and employer-sponsored retirement plans like 401(k)s and 403(b)s. The withdrawals are taxed as ordinary income in the year you take them.
Roth IRAs are the notable exception. Because you already paid taxes on the money before contributing it, Roth IRAs do not require distributions during the original owner’s lifetime. However, Roth accounts held inside an employer plan (like a Roth 401(k)) were historically subject to RMDs, though recent legislation has eliminated that requirement as well.
If you’re still working and participating in a workplace retirement plan like a 401(k) or profit-sharing plan, you can delay RMDs from that specific plan until the year you actually retire. This exception doesn’t apply if you own 5% or more of the business sponsoring the plan.
How Your RMD Amount Is Calculated
Your RMD for any given year is determined by dividing your account balance on December 31 of the prior year by a life expectancy factor from an IRS table. A larger balance or a shorter life expectancy factor means a bigger required withdrawal.
Most people use the Uniform Lifetime Table, which applies to unmarried account owners, married owners whose spouse is not more than 10 years younger, and married owners whose spouse is not the sole beneficiary. If your spouse is both your sole beneficiary and more than 10 years younger than you, you use the Joint Life and Last Survivor Expectancy Table instead, which produces a smaller RMD because of the longer combined life expectancy. Beneficiaries who inherit an account and are not the spouse use a separate Single Life Expectancy Table.
As a rough example, a 73-year-old with $500,000 in a traditional IRA would divide that balance by the life expectancy factor for age 73 (which is 26.5 under the current Uniform Lifetime Table), producing an RMD of about $18,868 for that year. The percentage of your account you must withdraw increases each year as the life expectancy factor shrinks.
Deadlines to Know
For your very first RMD, you have until April 1 of the year after you turn 73. So if you turn 73 in 2025, your first RMD deadline is April 1, 2026. There’s a catch with this delay, though: your second RMD is still due by December 31 of that same year. That means you’d take two taxable distributions in one calendar year, which could push you into a higher tax bracket.
For every year after your first, the deadline is simply December 31. You can take the money in a lump sum or spread withdrawals throughout the year, as long as the total meets or exceeds your required amount by year-end.
Penalties for Missing an RMD
Failing to withdraw the full RMD by the deadline triggers a 25% excise tax on the amount you should have taken but didn’t. On a $20,000 RMD you forgot to take, that’s a $5,000 penalty on top of the regular income tax you’ll owe when you eventually withdraw the money.
If you catch the mistake and correct it within two years, the penalty drops to 10%. You’ll need to file IRS Form 5329 to report the shortfall. If you missed the deadline for a legitimate reason, such as a serious illness or a financial institution’s error, you can request a penalty waiver by attaching an explanation to that same form. The IRS grants these waivers regularly when the cause is reasonable and the shortfall is corrected promptly.
Strategies for Managing RMDs
Because RMDs are taxed as ordinary income, they can affect your overall tax picture in several ways. Larger distributions may push you into a higher federal tax bracket, increase the taxable portion of your Social Security benefits, or raise your Medicare premiums through the income-related monthly adjustment amount (IRMAA).
One common approach is taking distributions before age 73, sometimes called “pre-RMD withdrawals,” to draw down the account balance while you’re in a lower tax bracket during early retirement. Another option is converting traditional IRA funds to a Roth IRA in years when your income is lower, paying taxes on the conversion now to reduce future RMDs.
If you’re charitably inclined and at least 70½, you can direct up to $105,000 per year from your IRA straight to a qualified charity through a qualified charitable distribution (QCD). The amount counts toward your RMD but isn’t included in your taxable income, effectively giving you a tax-free way to satisfy the requirement while supporting a cause you care about.