Required Minimum Distributions Explained: What to Know

What Is a Required Minimum Distribution?

A required minimum distribution is the annual withdrawal the IRS mandates from tax-deferred retirement accounts once you reach a defined age. The amount is calculated using your prior year-end account balance and a life expectancy factor from IRS tables. Missing the full amount triggers a 25% excise tax.

A required minimum distribution is the annual amount the IRS mandates you withdraw from tax-deferred retirement accounts starting at a defined age. The government allowed you to defer taxes on contributions and growth for decades. RMDs are how it collects. Each year, a formula using your prior year-end account balance and a life expectancy factor from IRS tables determines the minimum you must withdraw and report as ordinary income for that year.

RMD rules apply to traditional IRAs, rollover IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, and 457(b) governmental plans. Roth IRAs carry no RMD requirement during the original account owner’s lifetime. Starting in 2024 under SECURE 2.0, designated Roth accounts inside 401(k) and 403(b) plans are also exempt. That exemption is a meaningful structural advantage for retirees who can keep Roth balances intact and let them compound tax-free.

Which Accounts Require RMDs?

Not every retirement account triggers the same obligation. Understanding which of your accounts are subject to RMD requirements affects both your annual calculation and your long-term distribution planning.

If you hold multiple traditional IRAs, you calculate the RMD for each separately and may aggregate the total withdrawal across any of those IRAs. 401(k) plans work differently: each plan’s RMD must be taken from that specific plan. You cannot satisfy a 401(k) RMD with an IRA withdrawal, or pull extra from one 401(k) to cover a shortfall in another.

Inherited retirement accounts follow a separate set of rules entirely, with timelines that are often far more compressed than those for original account owners. Inherited IRA RMD rules depend on your relationship to the deceased, whether the original owner had already begun required distributions, and the year of death. The decisions made in the months following an inheritance are frequently irreversible. Reviewing your specific situation with a fiduciary before taking any action is time well spent.

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When Do Required Minimum Distributions Start?

The required minimum distribution age has shifted twice in recent years due to legislative changes. Under the original SECURE Act of 2019, the starting age moved from 70.5 to 72. SECURE 2.0, enacted in December 2022, pushed it to 73 for anyone who turned 72 after December 31, 2022. The age is scheduled to move again to 75 in 2033 for those born in 1960 or later. That RMD age change under SECURE 2.0 gave many retirees additional years to reduce pre-tax balances before mandatory distributions begin.

Your first RMD may be delayed until April 1st of the year following the year you turn 73. This is the required beginning date. Every RMD after the first must be taken by December 31 of that calendar year. Delaying the first means taking a second RMD in the same tax year as the first. For many retirees, that stacks income in a way that pushes them into a higher tax bracket and can trigger IRMAA Medicare surcharges. Taking the first distribution in the year you turn 73 is usually cleaner.

One planning exception: if you are still working at 73 and actively participating in your current employer’s 401(k), you may defer RMDs from that specific plan until you retire, provided you own less than 5% of the company. This exception does not apply to IRAs or to prior employer plans.

How to Calculate Your RMD Amount

The RMD calculation method is straightforward. Take your retirement account balance as of December 31 of the end of the previous year and divide it by the distribution period from the IRS life expectancy table that corresponds to your age. The result is the calculated RMD you must withdraw from that account for the current year.

The Uniform Lifetime Table is the life expectancy table that applies to most account holders. At age 73, the distribution period is 26.5. At 80, it falls to 20.2. As the factor decreases annually, the required percentage of your retirement account balance rises. If your sole beneficiary is a spouse more than 10 years younger, the Joint and Last Survivor Table applies and produces a longer distribution period, meaning smaller annual distributions. A third table, the Single Life Table, applies to certain inherited account situations and is not used for original account owners calculating their own RMDs.

A worked example: the retirement account balance for an IRA owner turning 73 in 2025 is $900,000 at the end of the previous year, December 31, 2024. Divide $900,000 by 26.5. The full RMD amount for 2025 is approximately $33,962. That figure is added to taxable income for the year and taxed as ordinary income at the account holder’s marginal rate.

If you are calculating RMD amounts across multiple individual retirement accounts, the rules differ by account type. Traditional IRA RMDs are calculated per account but may be aggregated and the full amount withdrawn from any combination of your IRAs. Each 401(k) plan’s minimum distribution must be satisfied from within that specific plan. You cannot use an IRA withdrawal to cover a 401(k) RMD obligation.

What Is the RMD Penalty?

The RMD penalty for failing to take the full required distribution is 25% of the shortfall. On a $35,000 missed RMD, you owe $8,750 to the Internal Revenue Service before paying any income taxes on the underlying amount. SECURE 2.0 reduced this excise tax from the prior rate of 50%, but the penalty remains severe and entirely avoidable with basic planning.

A correction window exists under current tax laws: if you take the missed distribution and file IRS Form 5329 requesting penalty abatement within two years, the rate may drop to 10%. The IRS has historically been willing to waive the excise tax for first-time failures that are corrected promptly and with proper documentation, but that relief is not guaranteed and requires you to address it on your tax return for the relevant tax year.

The most reliable approach is systematic. Set calendar reminders for both the December 31st deadline and a calculation review in the fall. Most custodians, including Schwab, will calculate your RMD and distribute it automatically with appropriate instructions in place. Review those instructions annually to account for changes in your retirement account balance at year end.

Where to Find the RMD Tables for 2025 and 2026

The IRS Uniform Lifetime Table used to calculate required minimum distributions for 2025 and 2026 is published in IRS Publication 590-B (Distributions from Individual Retirement Arrangements). The table has not changed since it was updated in 2022, so the distribution period factors that apply in 2025 apply equally in 2026. You use the table for the year in which you are taking the distribution and match your age as of December 31 of that distribution year.

How do I use the RMD table for 2025 and 2026?

Find your age in the Uniform Lifetime Table, note the corresponding distribution period, and divide your retirement account balance from December 31 of the prior year by that factor. For age 73 the period is 26.5, for age 74 it is 25.5, and for age 75 it is 24.6. The IRS publishes the full table in Publication 590-B, available at IRS.gov at no cost.

A few practical notes on using the table correctly. Your age for RMD purposes is the age you turn during the distribution year, not your age on January 1. If you turn 74 in September 2025, you use the distribution period for age 74 when calculating your 2025 RMD. The prior year account balance you divide by that factor is always the balance at the end of the year before the distribution year, December 31st of the previous year, regardless of what the account is worth when you actually take the withdrawal.

If you have multiple traditional IRAs, look up the distribution period once and apply it to each account’s prior year-end balance to find the RMD amounts for each. You may then satisfy the combined total from any one or any combination of those accounts. If you have a 401(k) in addition to an IRA, the 401(k) RMD uses the same table but must be satisfied from within that plan.

Working through these calculations with a fiduciary before your first RMD year, and revisiting them annually as your retirement savings balance changes, is the most reliable way to avoid both errors and unnecessary tax liability. If your situation involves inherited accounts, a spouse more than 10 years younger, or a large pre-tax balance that could push you into a higher tax bracket, the table calculation is only the starting point. The strategy built around it is what determines your actual tax liability over time.

The income tax on RMDs is not optional. How much of that tax you ultimately pay is, to a meaningful degree, within your control if you plan ahead. The goal is to manage the size of future required distributions and the bracket in which they land. A tax-efficient investing framework built well before RMDs begin produces the best outcomes. Once distributions are mandatory, the options narrow considerably.

Roth Conversions Before RMD Age

Converting pre-tax IRA or 401(k) balances to a Roth account in the years between retirement and age 73 is one of the most effective ways to reduce future RMDs. Each dollar converted reduces the pre-tax balance that will eventually be subject to mandatory withdrawal rules. Roth assets have no RMD requirement and compound tax-free indefinitely. The tradeoff is paying ordinary income taxes on the converted amount in the year of conversion, which increases your tax liability in that year. The planning question is whether you pay tax now at a known rate or later at a rate that may be higher and on an amount that has continued to grow. A well-sequenced Roth conversion strategy in the years before required distributions begin is among the highest-leverage tax planning moves available to retirees with large pre-tax balances.

Qualified Charitable Distributions

If you are 70.5 or older and make regular charitable gifts, a qualified charitable distribution (QCD) is worth understanding. A QCD is a direct transfer from your IRA to a qualifying charity. Up to $105,000 per year (2024, indexed for inflation) counts toward your RMD obligation and is excluded entirely from your adjusted gross income. It never appears as taxable income on your return. For someone in a high bracket who gives regularly to charity, the QCD is consistently one of the most tax-efficient ways to satisfy an RMD. The transfer must go directly from your IRA custodian to the charity. Withdrawing the money yourself and then donating it does not qualify for the exclusion and does not count as a QCD.

Withdrawal Sequencing and Bracket Management

RMDs establish a floor on what must come out of pre-tax accounts each year. What you do voluntarily with your other accounts is not fixed. Coordinating which accounts you draw from beyond the RMD minimum, in what order, and at what amounts can keep total taxable income below the thresholds that trigger IRMAA Medicare surcharges, increase Social Security taxation, or push capital gains into higher rate brackets. The RMD amount itself is often less important than the total income picture it lands in. This kind of withdrawal sequencing is the core of a sound retirement withdrawal strategy rather than a standalone annual calculation.

How RMDs Interact With Social Security and Medicare

RMD income does not sit in isolation. It adds directly to the income measures that determine how much of your Social Security benefit is taxable and whether you owe Medicare premium surcharges.

Up to 85% of Social Security benefits become taxable when combined income, meaning adjusted gross income plus nontaxable interest plus half of Social Security benefits, exceeds $44,000 for married couples filing jointly ($34,000 for single filers). A retiree drawing $40,000 in Social Security may find that a $35,000 RMD pushes combined income past the threshold and makes most of that benefit taxable income.

IRMAA, the Income-Related Monthly Adjustment Amount, creates a parallel problem. Medicare Part B and Part D surcharges apply when modified adjusted gross income exceeds defined thresholds. In 2025, the first IRMAA tier for married couples begins at $212,000. A large RMD can push a retiree over a threshold and increase their Medicare premiums in the year two years forward, since IRMAA looks back at income from two tax years prior. The surcharges can add several thousand dollars annually to Medicare costs and are easy to overlook when projecting retirement income.

Coordinating RMD amounts with Social Security benefit timing is one of the more consequential retirement income planning decisions you face. The Social Security optimization choices you make in the years just before and during mandatory distribution years compound in both directions and are worth modeling carefully before the deadlines arrive.

Inherited IRA RMD Rules

Inherited retirement accounts follow their own rules, and for most non-spouse beneficiaries who inherited after January 1, 2020, the timeline is far more compressed than many people expect. The SECURE Act eliminated the stretch IRA strategy for most beneficiaries. In its place: the 10-year rule.

Under the 10-year rule, the entire inherited account balance must be distributed by the end of the tenth calendar year following the original account owner’s death. Whether annual distributions are required within that window depends on whether the owner had already reached their required beginning date. If the owner died before their RMD start date, no annual distributions are required in years one through nine, but the full balance must be gone by year ten. If the owner died after their required beginning date, annual RMDs are required in years one through nine based on the beneficiary’s life expectancy, with the remaining balance taken in year ten.

Surviving spouses retain more flexibility and may roll an inherited IRA into their own account, applying their own distribution schedule. Eligible designated beneficiaries, a defined category that includes minor children of the deceased (until the age of majority), disabled individuals, chronically ill individuals, and those not more than 10 years younger than the deceased, also have access to extended distribution options.

The decisions made in the months after inheriting a retirement account are often irreversible. The Retiring Soon Financial Checklist can help frame the broader estate and transition picture if you are navigating an inheritance alongside your own retirement planning.

Common RMD Mistakes and How to Avoid Them

Most RMD errors come down to timing misunderstandings, aggregation mistakes, or failing to track inherited accounts separately from personal ones.

Conflating IRA and 401(k) aggregation rules is the most common calculation error. IRA RMDs can be satisfied by pulling the total from any combination of your traditional IRAs. 401(k) RMDs cannot be satisfied this way. Each 401(k) plan must receive its own independent distribution. Pulling extra from an IRA to cover a 401(k) shortfall does not satisfy the 401(k) obligation and may still trigger the 25% excise tax on the plan shortfall.

Missing an inherited account is another frequent problem, particularly when the inherited IRA is held at a different custodian or was received through an estate years earlier. Inherited accounts have their own RMD schedule and are tracked independently from your personal retirement accounts.

Treating the April 1 deadline as an annual rule rather than a one-time first-year option leads to missed distributions. April 1 applies only to your first RMD. Every subsequent year, the hard deadline is December 31. There is no extension available after the first year.

Failing to project future RMD sizes is a planning error that compounds quietly until it does not. Retirees who have spent decades building large pre-tax balances often underestimate how large mandatory distributions will become when the life expectancy factor compresses in their late seventies and eighties. Modeling your RMD trajectory a decade out and planning accordingly, including Roth conversions and strategic giving, is far more effective than reacting to large tax bills after the fact.

How RMDs Fit Into Your Broader Withdrawal Plan

Required minimum distributions set a floor. They do not define a withdrawal strategy. The decisions about which accounts to draw from voluntarily, how to sequence distributions across taxable, tax-deferred, and tax-free accounts, and how to time larger withdrawals around income thresholds are what separate a reactive approach from one built to minimize lifetime taxes.

The Preserve. Strengthen. Grow. framework that guides how we construct and manage portfolios at Holland Capital Management applies here too. Preserving tax-advantaged balances for as long as possible, strengthening your long-term tax position through deliberate Roth conversion and sequencing decisions, and allowing tax-free compounding to do its work in the right accounts are the underlying principles. RMDs are not just a compliance requirement. They are a planning lever when approached with a clear strategy rather than a year-end obligation. The amount of your RMD in any given year is determined by a formula, but what you do with your broader retirement savings around that obligation is where real tax management happens.

For a complete picture of how required distributions interact with account sequencing, bracket management, and Roth decisions across your retirement years, the Retirement Planning section covers the full range of withdrawal and income planning decisions you will face.