Guide · Retirement & Pensions
Required Minimum Distributions: What They Are and How to Plan Around Them
The IRS eventually wants its share of the tax-deferred money sitting in your traditional IRA and 401(k). From age 73, Required Minimum Distributions force annual withdrawals whether you need the income or not — and the penalty for missing one is steep. Here is how to calculate yours and reduce the tax hit.
What accounts are subject to RMDs?
RMDs apply to all pre-tax retirement accounts: traditional IRAs, rollover IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, 457(b)s, and most other employer-sponsored plans. The SECURE 2.0 Act of 2022 raised the starting age from 72 to 73 for anyone who had not yet turned 72 by the end of 2022. It rises again to 75 for those born in 1960 or later, effective 2033.
Roth IRAs are a notable exception — they have no RMDs during the original owner's lifetime. Following SECURE 2.0, Roth 401(k) accounts are also now RMD-free during the owner's lifetime, closing a gap that previously required rolling Roth 401(k) funds into a Roth IRA.
How to calculate your RMD
The formula is simple: divide your account balance as of 31 December of the prior year by the IRS Uniform Lifetime Table divisor for your age. The divisor decreases with age, so the RMD grows as a percentage of the account over time. Most IRA custodians will calculate this for you automatically, but it is worth understanding the underlying math.
| Age | IRS divisor | RMD amount | Tax at 22% federal |
|---|---|---|---|
| 73 | 26.5 | $18,868 | $4,151 |
| 75 | 24.6 | $20,325 | $4,472 |
| 78 | 22.0 | $22,727 | $5,000 |
| 80 | 20.2 | $24,752 | $5,445 |
| 85 | 16.3 | $30,675 | $6,749 |
Based on IRS Uniform Lifetime Table (Publication 590-B). Assumes constant $500,000 balance for illustration. Actual RMDs grow as the divisor shrinks even if the balance stays flat.
Qualified Charitable Distributions: the best RMD strategy
If you are age 70½ or older and charitably inclined, a Qualified Charitable Distribution (QCD) is one of the most tax-efficient moves in retirement planning. A QCD is a direct transfer from your IRA to a qualifying charity. In 2025 you can direct up to $105,000 per year this way.
The critical advantage: the QCD counts toward your RMD for the year but does not appear as taxable income on your return. This means it does not trigger higher Medicare premiums (IRMAA), does not increase the taxable portion of Social Security benefits, and does not affect your adjusted gross income. A retiree in the 22% bracket who satisfies a $20,000 RMD via a QCD to charity saves $4,400 in federal tax versus taking the cash and donating separately.
Roth conversions before 73: the window to plan
If you retire before 73 with large pre-tax balances and relatively low income, the years between retirement and RMD age are a valuable planning window. Converting portions of your traditional IRA to Roth each year — staying within your current tax bracket — reduces the eventual RMD amount and therefore reduces forced taxable income later. It also shrinks the estate that heirs will inherit as a taxable account.
The calculus depends on your current versus future marginal rate, whether you need the Roth funds to pay the conversion tax, and how long the money has to compound. A financial adviser or tax professional can model the optimal annual conversion amount for your situation.
Frequently asked questions
When must I take my first RMD?
Under SECURE 2.0, the RMD starting age is 73 for anyone who turns 73 after 31 December 2022. It rises further to 75 for those born in 1960 or later (effective 2033). Your first RMD can be delayed until 1 April of the year following the year you turn 73, but if you do delay, you will take two RMDs in that second year — one for the prior year and one for the current year — which could push you into a higher tax bracket.
What happens if I miss an RMD?
Missing an RMD triggers a 25% excise tax on the amount you should have withdrawn but did not. This penalty is reduced to 10% if you correct the shortfall within two years by taking the missed amount and filing Form 5329. The IRS can waive the penalty entirely for reasonable cause, but this requires proactive contact and documentation. Setting up automatic distributions is the simplest way to avoid missing a deadline.
How are RMDs taxed?
RMDs from traditional IRAs, 401(k)s, and 403(b)s are treated as ordinary income in the year received and taxed at your marginal federal rate. They can also trigger the taxation of Social Security benefits (up to 85% of benefits become taxable once combined income exceeds $44,000 for married couples), push you into a higher Medicare IRMAA bracket, and increase your state income tax bill. Qualified Charitable Distributions are the primary tool to satisfy an RMD without adding to taxable income.
Do Roth IRAs have RMDs?
No. Roth IRAs have no RMDs during the original owner's lifetime, which is one of their key advantages. Under SECURE 2.0, Roth 401(k) accounts are also now RMD-free during the owner's lifetime, eliminating the previous need to roll a Roth 401(k) into a Roth IRA to avoid RMDs. Inherited Roth IRAs are subject to different rules depending on your relationship to the original owner.