How Required Minimum Distributions Work and When They Start

A reader emailed me last spring with a letter from her IRA custodian that said she owed a withdrawal of 18,868 dollars by December 31. She had never touched the account, she did not need the money, and she assumed it was a mistake. It was not. She had turned 73.

Required minimum distributions are the IRS's way of finally collecting tax on money that has grown tax deferred for decades. The rules are not hard once you see the pieces, but the penalties for missing a deadline are steep, and the first year has a trap that catches a lot of people. Here is how RMDs work, how to calculate yours, and how to keep more of the money.

What Required Minimum Distributions Are

An RMD is the smallest amount you must withdraw each year from most tax deferred retirement accounts once you reach a certain age. You can always take more. You just cannot take less without paying a penalty.

The withdrawal is taxed as ordinary income in the year you take it, at the same rates as a paycheck. It does not trigger the 10 percent early withdrawal penalty, because by definition you are well past 59 and a half.

The rule applies to these accounts:

• Traditional IRAs, SEP IRAs and SIMPLE IRAs
• 401(k), 403(b) and 457(b) plans, including the traditional side of a Solo 401(k)
• Inherited IRAs and inherited workplace plans, under their own separate rules

Roth IRAs have no RMDs while the original owner is alive. Since 2024, Roth 401(k) and Roth 403(b) accounts are exempt too.

When RMDs Start Under Current Rules

Your starting age depends on your birth year, because the SECURE 2.0 Act pushed the age back in stages.

The first year deadline trap

Your first RMD is due by April 1 of the year after you reach your starting age. Every RMD after that is due by December 31. If you wait until April for the first one, you will take two distributions in the same tax year, which can push you into a higher bracket and raise your Medicare premiums two years later.

For most people, taking the first RMD in the year you actually turn 73 is the cleaner choice.

How to Calculate Your Required Minimum Distribution

The formula has only two numbers. Take the account balance on December 31 of the previous year and divide it by your life expectancy factor from the IRS Uniform Lifetime Table.

Notice the factor shrinks each year, so the required percentage rises from about 3.8 percent at 73 to over 6 percent at 85. If your spouse is more than 10 years younger and is your sole beneficiary, you use the Joint Life table instead, which gives a smaller required amount.

Your custodian will usually calculate the number for you. Check it anyway, especially if you made a rollover late in the year, since money in transit on December 31 can be missed.

Handling Several Accounts at Once

The aggregation rules are different for different account types.

• IRAs: calculate the RMD for each traditional IRA separately, add them up, and withdraw the total from any one IRA or a mix of them.
• 403(b) plans: same idea, you can total them and withdraw from any 403(b).
• 401(k) and 457(b) plans: each plan must pay out its own RMD. You cannot cover a 401(k) RMD with an IRA withdrawal.

Holding three old 401(k) plans means three separate withdrawals, three sets of paperwork and three chances to miss one. Consolidating them before RMD age is usually worth an afternoon. Our guide to rolling over an old 401(k) walks through the direct rollover steps.

The still working exception

If you are still employed past your RMD age and do not own 5 percent or more of the company, you can usually delay RMDs from your current employer's plan until you retire. The exception does not cover IRAs or plans from former employers.

What Happens If You Miss an RMD

The penalty is an excise tax of 25 percent of the amount you should have withdrawn but did not. Miss an 18,868 dollar RMD and the penalty is 4,717 dollars, on top of the regular income tax you still owe when you take it.

The penalty drops to 10 percent if you correct the mistake within two years. You can also ask the IRS to waive it entirely for reasonable cause, such as a serious illness or a custodian error. Take the missed distribution right away, then file Form 5329 with a short letter explaining what happened and that it has been fixed.

Ways to Lower the Tax Bite

You cannot skip RMDs, but you can shape how much tax they cost you.

1. Qualified charitable distributions. From age 70 and a half, you can send money directly from an IRA to a charity. It counts toward your RMD and is excluded from income. The yearly cap is indexed to inflation and was 108,000 dollars for 2025.
2. Roth conversions before RMD age. Converting chunks of a traditional IRA in your 60s, in years when your income is low, shrinks the balance that RMDs are later calculated on.
3. Withholding from the RMD itself. Asking the custodian to withhold federal tax from a December RMD counts as if it were paid evenly through the year, which can replace quarterly estimated payments.
4. Timing within the year. Taking the RMD in December lets the money stay invested longer. Taking it in January removes the risk of forgetting.

If you are still years away, understanding what a Roth IRA actually does helps you decide how much to keep outside the RMD system altogether.

Inherited Accounts Follow Different Rules

If you inherit an IRA from someone other than your spouse, the 10 year rule usually applies. The account must be emptied by the end of the tenth year after the year of death. If the original owner had already started RMDs, you also have to take annual withdrawals in years one through nine.

A surviving spouse has more options, including treating the IRA as their own. That choice delays RMDs until the spouse reaches their own starting age, which often makes sense for a younger widow or widower.

Frequently Asked Questions

Can I reinvest my required minimum distribution?

Yes, you can reinvest the money in a regular taxable brokerage account, but not back into an IRA or 401(k). If you have earned income, you can also contribute to a Roth IRA up to the annual limit.

Do I have to take an RMD in the year I turn 73?

No, your first RMD can wait until April 1 of the following year. The catch is that the second RMD is still due by December 31 of that same year, so you would pay tax on two withdrawals at once.

Does my RMD count as income for Social Security taxes?

Yes, an RMD is included in the income that determines how much of your Social Security benefit is taxable. It can also raise Medicare Part B and D premiums through the IRMAA surcharge.

The Bottom Line

Write down your RMD starting age, check every account your custodian lists, and set a calendar reminder for early December. The math is one division problem. The real wins come from planning in your 60s with Roth conversions and charitable gifts, so the required withdrawals you face later are smaller and cheaper.