Required Minimum Distributions — or RMDs — are a retirement planning reality that many Americans overlook until they are close to retirement age. Missing an RMD triggers one of the harshest tax penalties in the IRS code: previously 50%, now reduced to 25% (or 10% if corrected quickly) of the amount you should have withdrawn. Understanding RMDs, calculating them correctly, and planning around them is essential for anyone with a traditional IRA, 401(k), or similar pre-tax retirement account.
What Is a Required Minimum Distribution (RMD)?
An RMD is the minimum amount the IRS requires you to withdraw annually from your tax-deferred retirement accounts once you reach a certain age. Because contributions to traditional IRAs and 401(k)s are made pre-tax, the IRS defers the tax — but it must eventually collect. RMDs ensure that retirement savings are drawn down and taxed during your lifetime.
Accounts subject to RMDs:
- Traditional IRAs
- Rollover IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k), 403(b), 457(b) plans
- Most other employer-sponsored retirement plans
Accounts NOT subject to RMDs (during your lifetime):
- Roth IRAs (original owner)
- Roth 401(k)s (as of 2024 SECURE 2.0 Act)
RMD Age: When Do They Start?
The SECURE 2.0 Act changed the RMD starting age:
| Birth Year | RMD Starting Age |
|---|---|
| Before 1951 | Age 70½ (pre-2020 rule) |
| 1951–1959 | Age 73 |
| 1960 and later | Age 75 |
Your first RMD may be delayed until April 1 of the year following the year you turn the required age. However, delaying the first RMD means you will take two RMDs in that calendar year (the delayed first + the second for the current year), which can significantly increase your taxable income for that year.
How RMDs Are Calculated
The IRS RMD formula is:
RMD = Account Balance (Dec. 31 of prior year) ÷ Life Expectancy Factor
The Life Expectancy Factor comes from IRS Publication 590-B Uniform Lifetime Table. The factor decreases each year as you age, requiring you to withdraw an increasingly larger percentage of your account.
RMD Example
| Account Balance | Age | Life Expectancy Factor | RMD Amount |
|---|---|---|---|
| $500,000 | 73 | 26.5 | $18,868 |
| $500,000 | 75 | 24.6 | $20,325 |
| $500,000 | 80 | 20.2 | $24,752 |
| $500,000 | 85 | 16.0 | $31,250 |
Notice how the RMD grows each year — both because the factor decreases and because poor investment returns reduce the account less than the withdrawal rate.
Multiple Accounts: How to Handle Several IRAs or 401(k)s
If you have multiple traditional IRAs: Calculate the RMD separately for each account, then add them together. You can withdraw the total from any one IRA or combination of IRAs — you do not need to take a separate RMD from each one.
If you have multiple 401(k)s: You must calculate and take the RMD separately from each 401(k). You cannot aggregate 401(k) RMDs across accounts.
Inherited IRAs: Have different RMD rules depending on your relationship to the deceased and the year of death. Non-spouse beneficiaries generally must empty inherited IRAs within 10 years under post-2020 rules.
The RMD Penalty for Missing a Distribution
Prior to 2023, the penalty for missing an RMD was 50% of the undistributed amount — one of the steepest tax penalties available. The SECURE 2.0 Act (2022) reduced this:
- Standard penalty: 25% of the amount not distributed
- Corrected within 2 years: Penalty reduced to 10%
Example: If your RMD was $20,000 and you took $0, the penalty is $5,000 (25%). If you catch and correct the error within the IRS correction window, it drops to $2,000.
RMD Tax Planning Strategies
1. Roth conversions before RMD age. Converting traditional IRA funds to a Roth IRA in the years between retirement and RMD start age reduces future RMDs. Roth IRAs have no RMDs.
2. Qualified Charitable Distributions (QCDs). If you are 70½ or older, you can direct up to $105,000/year (2024 limit, indexed for inflation) directly from your IRA to a qualified charity. QCDs count toward your RMD but are excluded from your taxable income.
3. Donating appreciated assets. While not directly RMD-related, donating appreciated securities to charity can offset the income increase from RMDs.
4. Aggregating RMDs. For multiple IRAs, you have flexibility in which account to draw from — consider drawing from the account with the lowest expected future growth to maximize tax-deferred compounding in your better-performing accounts.
Using Our RMD Calculator
Our free RMD Calculator uses the official IRS Uniform Lifetime Table to calculate your exact required minimum distribution. Simply enter:
- Your retirement account balance (as of December 31 of the prior year)
- Your current age
- Your account type (IRA, 401k, inherited)
The calculator shows your current year RMD, the applicable life expectancy factor, the percentage of your account balance required, and a year-by-year projection through age 90 so you can plan withdrawals in advance.
Always consult a qualified tax advisor or financial planner before making RMD decisions. Individual circumstances — including account types, beneficiary designations, and state tax laws — vary significantly.