What Is RMD? A Guide to Required Minimum Distributions

Required Minimum Distributions (RMDs) are withdrawals that the IRS generally requires from certain tax-deferred retirement accounts once an account owner reaches the applicable required beginning age. RMD rules are designed to ensure that money saved in tax-deferred accounts is eventually distributed and generally included in taxable income.

Understanding RMDs is an important part of retirement planning because these withdrawals can affect your taxable income, retirement cash flow, Medicare premiums, charitable giving, and the amount you leave to heirs.

Introduction to RMDs

Ever wondered why you may eventually have to withdraw money from a retirement account even if you do not need the cash? This is where Required Minimum Distributions come into play.

RMDs generally apply to traditional IRAs and many employer-sponsored retirement plans. The rules can be complicated, particularly when you have multiple accounts, continue working after your RMD age, or inherit a retirement account.

For a broader look at retirement withdrawals, see our Retirement Withdrawal Calculator.

When Do RMDs Begin?

Under the rules in effect for 2024, most individuals must begin taking RMDs for the year in which they reach age 73. This age was increased from 72 by the SECURE 2.0 Act.

If you reach age 73 in 2024, your first RMD generally must be taken by April 1, 2025. However, you can choose to take that first RMD during 2024 instead.

There is an important catch to using the April 1 deadline: if you delay your first RMD until the following year, you will generally have to take two RMDs in that following year — the delayed first RMD by April 1 and the next year's RMD by December 31.

For example, someone who reaches age 73 in 2024 could take their first RMD during 2024, or wait until April 1, 2025. If they wait, they would still have to take their 2025 RMD by December 31, 2025.

What If You Are Still Working?

The rules can be different for an employer-sponsored retirement plan if you are still working. Depending on the plan and your ownership status, you may be able to delay RMDs from your current employer's plan until you retire.

This "still working" exception generally does not apply to traditional IRAs. Your IRA RMD generally begins according to the age-based rules even if you continue working.

Which Accounts Require RMDs?

RMD rules generally apply to tax-deferred retirement accounts, including:

• Traditional IRAs
• SEP IRAs
• SIMPLE IRAs
• 401(k) plans
• 403(b) plans
• Governmental 457(b) plans
• Other qualifying defined-contribution retirement plans

Roth IRAs are different. Under the rules in effect in 2024, original owners of Roth IRAs do not have to take lifetime RMDs.

The SECURE 2.0 Act also eliminated lifetime RMDs from designated Roth accounts in employer-sponsored plans, such as Roth 401(k) accounts, beginning in 2024. This means an employee generally no longer needs to roll a Roth 401(k) into a Roth IRA solely to avoid lifetime RMDs.

Roth accounts can therefore be particularly useful in retirement and estate planning, although withdrawals and inherited Roth-account rules still need to be considered carefully.

How to Calculate Your RMD

For most IRA owners, the basic RMD calculation is:

RMD = Previous December 31 Account Balance ÷ Applicable Distribution Period

The applicable distribution period generally comes from the IRS Uniform Lifetime Table. A different table may apply when the sole beneficiary of the account is a spouse who is more than 10 years younger than the account owner.

The IRS generally requires each IRA to have its RMD calculated separately. However, an IRA owner can generally take the total IRA RMD from one or more of their IRAs. Employer plans such as 401(k)s generally have separate withdrawal requirements for each plan.

IRS Uniform Lifetime Table

The following table shows the applicable distribution periods from the IRS Uniform Lifetime Table used for most account owners. These factors are used as the denominator in the RMD calculation.

Age	Distribution Period	Age	Distribution Period
73	26.5	87	14.4
74	25.5	88	13.7
75	24.6	89	12.9
76	23.7	90	12.2
77	22.9	91	11.5
78	22.0	92	10.8
79	21.1	93	10.1
80	20.2	94	9.5
81	19.4	95	8.9
82	18.5	96	8.4
83	17.7	97	7.8
84	16.8	98	7.3
85	16.0	99	6.8
86	15.2	100	6.4

The IRS table continues beyond age 100. For example, the distribution period is 6.0 at age 101, 5.6 at age 102, and 2.0 for age 120 and older.

Example RMD Calculation

Suppose you have $400,000 in a traditional 401(k) at the end of the previous year and you are age 73. Using the Uniform Lifetime Table factor of 26.5:

$400,000 ÷ 26.5 = $15,094.34

Your approximate RMD would therefore be $15,094.

Your actual RMD may differ depending on the account type, applicable IRS table, beneficiary situation, and the exact account balance used for the calculation.

Taxes and RMDs

RMDs from traditional tax-deferred retirement accounts are generally included in taxable income as ordinary income, except to the extent the distribution consists of amounts that are not taxable.

This can make RMD planning particularly important for retirees who have substantial traditional IRA and 401(k) balances.

A large RMD can increase taxable income and potentially affect other areas of retirement planning. For some retirees, higher income can also affect the amount they pay for Medicare Part B and Part D through the income-related monthly adjustment amounts (IRMAA).

State income-tax treatment varies depending on where you live.

Strategies for Managing RMD Taxes

Several strategies may help manage the tax consequences of RMDs. The appropriate strategy depends on your income, age, account balances, charitable intentions, and broader retirement plan.

• Consider Roth Conversions: Converting some traditional IRA assets to a Roth IRA before RMDs begin may reduce future traditional IRA balances and therefore future RMDs. However, the conversion itself is generally taxable income in the year of conversion.
• Use Qualified Charitable Distributions: Eligible IRA owners age 70½ or older can make qualified charitable distributions directly to eligible charities. A QCD can satisfy all or part of an IRA owner's RMD and may be excluded from taxable income when the requirements are met.
• Plan Withdrawals Before RMD Age: Some retirees may choose to withdraw from traditional retirement accounts before RMDs begin, potentially spreading taxable income across several years.
• Coordinate Different Income Sources: Social Security, pensions, investment income, taxable-account withdrawals, Roth withdrawals, and RMDs can all interact. Looking at them together can produce a more useful retirement-income strategy than considering RMDs in isolation.

Qualified Charitable Distributions and RMDs

A Qualified Charitable Distribution (QCD) is a direct transfer from an eligible IRA to a qualified charity. The IRA owner must generally be at least age 70½ when the distribution is made.

For 2024, the annual QCD exclusion limit increased to $105,000 per individual.

A properly completed QCD can count toward an IRA owner's RMD while generally keeping the qualifying amount out of adjusted gross income. This can make QCDs useful for retirees who are already giving to charity and want to manage taxable retirement income.

The money must generally be transferred directly from the IRA trustee or custodian to the eligible charitable organization. Taking the money personally and then donating it does not receive the same QCD treatment.

Penalties for Missing an RMD

Missing an RMD can result in an IRS excise tax on the amount that should have been distributed but was not.

Under the SECURE 2.0 Act, the general excise tax was reduced from the previous 50% rate to 25%. In certain circumstances, the penalty can be reduced to 10% if the missed RMD is corrected within the applicable correction period.

If you miss an RMD because of a reasonable error and take appropriate corrective action, the IRS may waive the excise tax. Form 5329 and the applicable IRS procedures may be required.

Because the consequences can be significant, it is important to monitor RMD deadlines rather than waiting until the end of the year.

How RMDs Affect Retirement Planning

RMDs are more than a tax requirement. They can affect the overall structure of your retirement-income plan.

• Cash Flow: You may be required to withdraw more from a traditional retirement account than you actually need for living expenses.
• Tax Brackets: A large RMD can increase taxable income and potentially move some income into a higher federal or state tax bracket.
• Medicare Costs: Higher income can affect Medicare premiums through IRMAA.
• Investment Strategy: RMDs may require you to sell investments or move money between accounts, making tax-aware withdrawal planning important.
• Estate Planning: Larger traditional retirement balances can create future tax obligations for beneficiaries.

For more information about building a retirement strategy, see our Retirement Planning Mistakes guide.

Special Considerations for Beneficiaries

RMD rules become more complicated when a retirement account is inherited. The rules depend on when the original owner died, whether the beneficiary is a spouse, whether the beneficiary qualifies as an eligible designated beneficiary, and whether the original owner had already reached their required beginning date.

Under the SECURE Act, many non-spouse beneficiaries who inherited a retirement account after 2019 are subject to a 10-year rule requiring the account to be fully distributed by the end of the tenth year following the owner's death.

However, this does not mean that every beneficiary simply waits until year 10 to withdraw everything. If the original owner had reached the required beginning date, annual distribution requirements can also apply during the 10-year period under the applicable rules.

Eligible designated beneficiaries — including surviving spouses, certain minor children, disabled or chronically ill individuals, and beneficiaries who are not more than 10 years younger than the account owner — may qualify for different distribution options.

Surviving spouses also have special options, including in many circumstances treating an inherited IRA as their own.

Because inherited retirement-account rules can be complicated, beneficiaries should review the specific account and beneficiary circumstances rather than assuming the standard 10-year rule applies in exactly the same way to everyone.

Strategies for Managing and Reducing Future RMDs

Consider Roth Conversions Before RMDs Begin

A Roth conversion moves money from a traditional IRA or other eligible tax-deferred account into a Roth IRA. The converted amount is generally included in taxable income for the year of conversion, subject to applicable rules.

Converting money during lower-income years before RMDs begin can sometimes reduce future RMDs. However, a conversion can also increase current taxes, so it should be evaluated as part of a multi-year tax plan.

Use QCDs When Charitable Giving Is Part of Your Plan

If you are age 70½ or older and already intend to make charitable donations, a QCD may allow you to satisfy part or all of an IRA RMD while excluding the qualifying amount from taxable income.

Use Your Retirement Accounts Intentionally

Rather than waiting until RMDs begin, some retirees may benefit from developing a withdrawal strategy years in advance. This can include coordinating taxable accounts, traditional retirement accounts, Roth accounts, pensions, and Social Security.

FAQs on RMDs

What if I work past age 73?

If you continue working after age 73, you may be able to delay RMDs from your current employer-sponsored retirement plan until you retire, provided the plan permits the delay and you meet the applicable requirements. This exception generally does not apply to traditional IRAs.

Do Roth 401(k)s have RMDs?

Beginning in 2024, designated Roth accounts in employer-sponsored retirement plans are no longer subject to lifetime RMDs for the account owner. This change means a Roth 401(k) generally does not require lifetime RMDs while you are alive.

Do Roth IRAs have RMDs?

Original owners of Roth IRAs are not required to take lifetime RMDs. However, beneficiaries who inherit Roth IRAs generally are subject to inherited-account distribution rules.

Can an RMD be reinvested?

Yes. An RMD generally cannot simply be returned to the same retirement account, but after taking the required distribution, you can generally use the money in other ways, including investing it in a taxable investment account if appropriate.

Can an RMD be used for charitable giving?

If you qualify for a QCD, an eligible IRA distribution can be sent directly to a qualified charity and may count toward your RMD. The 2024 annual QCD exclusion limit was $105,000 per individual.

Fun Facts About RMDs

• The RMD Age Has Changed: The age at which many Americans must begin RMDs has changed several times. Under the rules applicable in 2024, the general starting age was 73.
• The First-Year Deadline Can Be Misleading: Someone reaching age 73 in 2024 could wait until April 1, 2025, to take the first RMD. But doing so means taking two RMDs during 2025 if the person also has a 2025 RMD.
• The RMD Factor Changes Every Year: A 73-year-old generally uses a 26.5 distribution period under the Uniform Lifetime Table, while a 90-year-old uses 12.2.
• QCDs Can Be Significant: In 2024, eligible IRA owners could exclude up to $105,000 of qualifying charitable distributions from income, subject to the applicable rules.
• The Penalty Used to Be Higher: Before SECURE 2.0, the general excise tax for failing to take an RMD was potentially 50% of the shortfall. The legislation reduced the general rate to 25%, with a possible reduction to 10% when corrected within the applicable period.
• Roth 401(k) Rules Changed: Starting in 2024, original owners no longer have lifetime RMDs from designated Roth accounts in employer plans.

Conclusion

Required Minimum Distributions are an important part of retirement and tax planning for anyone with tax-deferred retirement accounts. The amount and timing of RMDs can affect your taxable income, retirement cash flow, Medicare premiums, charitable giving, and the assets ultimately passed to your beneficiaries.

Planning before RMDs begin can provide more flexibility. Depending on your circumstances, strategies such as Roth conversions, qualified charitable distributions, and carefully coordinated retirement withdrawals may help you manage the tax impact of required distributions.

Retirement planning is most effective when RMDs are considered together with Social Security, pensions, investment income, taxes, and spending needs.

Use the Retirementize calculator to explore how retirement income, withdrawals, taxes, and savings can work together in your overall retirement plan.

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