Plan for Required Minimum Distributions
Understand when RMDs start, how much you'll need to withdraw, and strategies to minimize the tax impact of mandatory retirement account distributions.
Start Your Free TrialWhat Are Required Minimum Distributions?
RMDs are mandatory withdrawals from tax-deferred retirement accounts like Traditional IRAs and 401(k)s. The IRS requires you to start taking distributions at age 73 (or 75 for those born after 1960).
- RMDs apply to Traditional IRAs, 401(k)s, 403(b)s, and most employer-sponsored plans
- Roth IRAs have no RMDs for the original owner
- Failure to take RMDs results in a 25% penalty on the amount not withdrawn
- RMD amounts increase each year based on IRS life expectancy tables
How RMDs Are Calculated
Your RMD is calculated by dividing your account balance by an IRS life expectancy factor based on your age.
- Account balance: Use the prior year-end balance (December 31)
- Life expectancy factor: From IRS Uniform Lifetime Table (or Joint Life Table if spouse is sole beneficiary and 10+ years younger)
- Calculation: Balance / Factor = RMD amount
- Annual increase: As you age, the factor decreases, so RMD percentages increase
Minimize the Tax Impact of RMDs
Large RMDs can push you into higher tax brackets, increase Medicare premiums, and make more of your Social Security taxable. Here are strategies to reduce the impact:
- Roth conversions: Convert before RMDs start to reduce future mandatory distributions
- Qualified Charitable Distributions (QCDs): Donate up to $105,000 directly from IRA to charity (counts toward RMD but isn't taxable)
- Strategic timing: Take RMDs in lower-income years when possible
- Aggregate accounts: You can take total RMD from any combination of same-type accounts
Frequently Asked Questions
At what age do RMDs start?
For most people, RMDs begin at age 73. If you were born in 1960 or later, RMDs start at age 75. You must take your first RMD by April 1 of the year after you turn the applicable age.
What happens if I don't take my RMD?
The penalty for missing an RMD is 25% of the amount you should have withdrawn. If corrected within 2 years, the penalty drops to 10%. It's a costly mistake to avoid.
Do Roth IRAs have RMDs?
No. Roth IRAs have no RMDs for the original owner during their lifetime. This is a major advantage and a key reason to consider Roth conversions before RMDs begin.
Can I take more than my RMD?
Yes. The RMD is the minimum you must withdraw, but you can always take more. However, you cannot apply excess withdrawals to future years' RMDs.
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