Retirement accounts don’t stay tax-deferred forever. Once you reach a certain age, the IRS requires withdrawals, and knowing the rules early can save you thousands in taxes and penalties.
What an RMD Is and When Yours Begins
A required minimum distribution, or RMD, is the smallest amount the IRS forces you to pull from most tax-deferred retirement accounts each year once you reach a trigger age. The logic is simple: you likely deducted your contributions to a traditional IRA or 401(k) and let the money grow untaxed for decades, so eventually the government collects the income tax it deferred.
Under the SECURE 2.0 Act, the starting age is now 73 for anyone born between 1951 and 1959, and it climbs to 75 for those born in 1960 or later. That is a meaningful change from the old age-70½ rule, and it gives many people a few extra years of tax-deferred growth before withdrawals become mandatory.
RMDs apply to traditional IRAs, SEP and SIMPLE IRAs, and employer plans like 401(k), 403(b), 457(b), and the federal Thrift Savings Plan. They do not apply to Roth IRAs during the original owner’s lifetime, and thanks to SECURE 2.0, Roth 401(k) balances no longer require lifetime distributions either. That difference is one reason Roth accounts play such a distinct role in long-term planning.
Your very first RMD has a special deadline called the required beginning date: April 1 of the year after you turn 73. Every RMD after that is due by December 31. Delaying your first one sounds appealing, but it forces you to take two distributions in a single calendar year, which can spike your taxable income.
How the Amount Is Actually Calculated
The math is more straightforward than most people expect. You take the balance of each account as of December 31 of the prior year and divide it by a life expectancy factor published in the IRS Uniform Lifetime Table. The factor shrinks as you age, so the required percentage of your account slowly climbs over time.
At age 73, the current factor is 26.5, which works out to roughly 3.8% of the balance. So a traditional IRA holding $500,000 at year-end would produce an RMD of about $18,868. By your early 80s, that percentage roughly doubles as the divisor gets smaller, which is why RMDs tend to grow into a larger tax event later in retirement.
A different table applies if your spouse is more than ten years younger than you and is your sole beneficiary. In that case, the Joint Life and Last Survivor Table produces a smaller required amount. Your account custodian will often calculate and even report your RMD, but the legal responsibility for taking the correct amount always rests with you.
The Tax Bite and Its Ripple Effects
Every dollar of a traditional-account RMD is taxed as ordinary income in the year you take it. That alone can push you into a higher marginal bracket, but the ripple effects often catch retirees off guard. A large distribution can increase how much of your Social Security benefit becomes taxable and can raise the effective tax rate on your long-term capital gains.
RMDs also feed into the modified adjusted gross income figure that determines your Medicare premiums. Because the income-related monthly adjustment amount, known as IRMAA, uses a two-year lookback, a big withdrawal today can quietly raise your Part B and Part D premiums two years from now. Coordinating withdrawals to stay under key income thresholds can matter as much as the RMD itself.
This is educational information rather than personalized guidance, and everyone’s bracket, state taxes, and other income sources differ, so it’s worth modeling your own numbers or speaking with a qualified tax professional. Planning the years between retirement and age 73, when your income may be temporarily low, is often where the biggest opportunities to manage lifetime taxes appear.
Penalties and Deadlines You Cannot Ignore
Missing an RMD used to carry a brutal 50% excise tax on the shortfall. SECURE 2.0 softened that to 25%, and if you correct the mistake promptly, usually by withdrawing the missed amount and filing Form 5329 within a defined correction window, the penalty drops to 10%. Still, an entirely avoidable penalty of that size is worth building a reminder system around.
Aggregation rules trip up people with multiple accounts. If you own several traditional IRAs, you can add up all their required amounts and take the total from just one of them. The same flexibility applies within 403(b) contracts. Employer 401(k) plans get no such grace: you must calculate and withdraw a separate RMD from each individual 401(k) you hold.
Inherited retirement accounts follow their own, more complicated framework. Under the SECURE Act, most non-spouse beneficiaries must empty an inherited account within ten years, and in many cases must also take annual distributions along the way. Because those rules hinge on your relationship to the original owner and when they passed, they deserve their own careful review rather than assumptions.
Strategies That Can Soften the Impact
The years before age 73 are prime territory for planning. Some retirees use the lower-income window between leaving work and their RMD start date to convert portions of a traditional IRA to a Roth, paying tax now at a potentially lower rate and shrinking the balance that future RMDs will be based on. Roth conversions are permanent and taxable in the year you make them, so the timing and amount matter.
If you’re charitably inclined, a qualified charitable distribution lets you send money directly from your IRA to an eligible charity starting at age 70½. The amount, indexed for inflation and roughly $108,000 in 2025, counts toward your RMD but is excluded from your taxable income entirely, which can be more efficient than taking the distribution and donating separately.
There’s also a still-working exception. If you remain employed past your RMD age and own 5% or less of the company, you can generally postpone RMDs from that current employer’s plan until you actually retire, though it does not cover IRAs or old 401(k)s from former jobs. And if you simply don’t need the cash, remember an RMD only requires that you withdraw the money, not spend it; you can reinvest it in a regular taxable brokerage account to keep it working toward your goals.
