What Are RMD Requirements and When Do They Apply to Me?
Required Minimum Distributions (RMDs) are the minimum amount of money you must withdraw each year from certain retirement accounts. Understanding when and how they apply is essential for avoiding costly penalties and managing your retirement income strategically.
How RMDs Work đź“‹
An RMD is not optional—it's a rule set by the IRS. Once you reach a certain age, the government requires you to begin taking distributions from most tax-deferred retirement accounts, such as traditional IRAs, 401(k)s, 403(b)s, and similar plans.
The amount you must withdraw is calculated using three pieces of information:
- Your account balance as of December 31 of the previous year
- Your age (or your spouse's age if your spouse is the designated beneficiary)
- An IRS life expectancy table that assigns a divisor based on your age
The formula is straightforward: divide your account balance by the divisor, and that's your required distribution for the year.
When RMDs Begin
RMDs typically start the year you turn 73 (as of 2023, following the Secure Act 2.0 changes). This age was previously 72, and before that 70½—so if you're already retired, verify the current rule for your situation.
However, if you're still working and don't own 5% or more of the company sponsoring your 401(k) or similar plan, you may be able to delay RMDs from that specific plan until you actually retire. This exception does not apply to traditional IRAs.
Which Accounts Are Subject to RMDs?
| Account Type | RMD Required? |
|---|---|
| Traditional IRA | Yes |
| SEP IRA | Yes |
| SIMPLE IRA | Yes |
| 401(k) | Yes |
| 403(b) | Yes |
| 457(b) | Yes |
| Roth IRA (during your lifetime) | No* |
| Health Savings Account (HSA) | Generally no |
*Roth IRA owners don't face RMDs during their lifetime, but beneficiaries do after inheritance.
Key Variables That Change Your Situation
Spousal status: If your spouse is significantly younger and is your sole beneficiary, you can use their life expectancy table, which may result in a smaller required distribution.
Account ownership: RMDs from accounts you own are different from inherited accounts, which have their own withdrawal rules depending on when you inherited them and your relationship to the original owner.
Multiple accounts: You can aggregate RMDs from multiple traditional IRAs (calculating each separately, then totaling the withdrawals), but RMDs from 401(k)s, 403(b)s, and similar workplace plans must generally be taken from each plan individually.
Roth conversions: Converting funds from a traditional IRA to a Roth doesn't eliminate future RMDs from any remaining traditional IRA balance—the calculation includes what's left after conversion.
What Happens If You Miss an RMD
The penalty for not taking your full RMD is substantial—historically 25% of the shortfall (recently reduced from 50% under the Secure Act 2.0), though you may be able to request a waiver if you have a reasonable excuse and have corrected the error.
Beyond penalties, missing RMDs can trigger tax complications and reduce the tax-deferred growth benefit you've built over decades.
Planning Considerations
Timing matters: You can take your RMD anytime during the calendar year, but the deadline is December 31 (except for your first RMD, which can be taken by April 1 of the following year).
Income and taxes: RMDs are taxable as ordinary income in the year you take them. Understanding how much you'll withdraw helps with tax planning, especially if you're in a higher-income year.
Charitable giving: If you're charitably inclined, there are strategies that allow you to direct IRA distributions to charity in ways that may benefit your tax situation—but this requires understanding your specific circumstances and applicable rules.
Longevity planning: The RMD calculation assumes average life expectancy, but individual lifespans vary significantly. Your personal health profile and family history may influence how you think about required withdrawals.
Getting Your Specific RMD Amount
Your IRA custodian, 401(k) plan administrator, or financial institution should calculate and report your RMD to you automatically. However, verify the calculation yourself or work with a tax professional, especially if you have multiple accounts or complex circumstances.
The IRS provides worksheets and life expectancy tables on their website and in Publication 590-B, but working with a tax advisor or financial professional can ensure you understand your obligations and opportunities for your situation.
