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RETIREMENT Required Minimum Distributions (RMDs): What They Are... 2026-03-04 · 5 min read · rmd · required-minimum-distributions · retirement

Required Minimum Distributions (RMDs): What They Are and How to Minimize Them

retirement 2026-03-04 · 5 min read rmd required-minimum-distributions retirement ira 401k taxes

If you've been diligently saving in a traditional IRA or 401(k) for decades, the IRS eventually wants its cut. That's where required minimum distributions come in — mandatory annual withdrawals from your tax-deferred retirement accounts that begin at a certain age, whether you need the money or not.

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Understanding RMDs before they hit can save you thousands in taxes and prevent costly penalties.

What Is a Required Minimum Distribution?

A required minimum distribution is the minimum amount the IRS requires you to withdraw from most tax-deferred retirement accounts each year starting at age 73 (as of 2023, under the SECURE 2.0 Act — it was 70½ before 2020, and 72 from 2020–2022).

The accounts subject to RMDs include:

Roth IRAs are the notable exception — they have no RMDs during the original owner's lifetime because contributions are made with after-tax money.

When Do RMDs Begin?

You must take your first RMD by April 1 of the year after you turn 73. After that, each subsequent RMD is due by December 31 of that calendar year.

One catch: if you delay your first RMD to April 1, you'll have to take two distributions in that same year — the first for the prior year and the second for the current year. Taking two RMDs in one year can push you into a higher tax bracket. Most financial advisors recommend taking your first RMD in the year you turn 73 rather than waiting.

Working exception: If you're still working at 73 and participating in your current employer's 401(k), you may be able to delay RMDs from that plan until you retire. This exception doesn't apply to IRAs or plans from previous employers.

How Is the RMD Amount Calculated?

Your RMD is calculated by dividing your account balance as of December 31 of the prior year by a life expectancy factor from the IRS Uniform Lifetime Table.

For example, if you're 75 and your IRA was worth $500,000 at the end of last year:

The factor decreases each year as your life expectancy shortens, which means the percentage you must withdraw increases as you age. At 80, the factor is 20.2; at 85, it drops to 16.0.

If you have multiple traditional IRAs, you calculate a separate RMD for each account but can take the total from any one or combination of them. For 401(k)s, each plan requires its own separate withdrawal.

What Happens If You Miss an RMD?

The penalty for missing an RMD used to be 50% of the amount not withdrawn — one of the steepest in the entire tax code. SECURE 2.0 reduced this to 25%, and further to 10% if you correct the mistake in a timely manner. Still severe enough to be worth avoiding carefully.

Strategies to Reduce RMD Tax Impact

RMDs are taxed as ordinary income. A large RMD can push you into a higher bracket, increase Medicare premiums (IRMAA surcharges apply at certain income thresholds), and even cause more of your Social Security to become taxable. Here are the main ways to manage the hit.

1. Roth Conversions Before Age 73

Convert traditional IRA money to a Roth IRA before your RMDs start. You pay taxes on the converted amount now, but you reduce the balance subject to future RMDs. The ideal window is often after retirement (when income drops) but before RMDs begin — typically the years between 60 and 72.

A Roth conversion ladder over several years can systematically shrink your traditional IRA while staying within lower tax brackets. Even converting $20,000–$50,000 per year in this window can meaningfully reduce lifetime RMDs.

2. Qualified Charitable Distributions (QCDs)

If you're 70½ or older and charitably inclined, a Qualified Charitable Distribution lets you transfer up to $105,000 per year (2024 limit, indexed for inflation) directly from your IRA to a qualified charity. The amount transferred satisfies your RMD but is excluded from your taxable income — you don't itemize, you just exclude it.

For someone who donates regularly and would otherwise take the standard deduction, a QCD is almost always better than withdrawing the RMD and donating separately.

3. Keep Working (If You Have a Current Employer 401k)

If you're still employed and your employer plan allows it, you can continue contributing to and deferring RMDs from your current 401(k). Roll old 401(k)s into the current plan before age 73 to extend the deferral — IRA balances are still subject to RMDs regardless.

4. Strategic Withdrawal Timing

If your RMD happens to fall in a year when your other income is unusually low, you might consider taking more than the minimum to fill up a lower bracket intentionally. This "bracket filling" approach reduces future RMDs and can be efficient when combined with other income planning.

5. Delay Social Security

Delaying Social Security until 70 (maximum benefit) means you'll likely have a gap between retirement and 70 with relatively low income. Use that window for Roth conversions while your tax rate is low, then start RMDs at 73 with a smaller balance.

RMDs and Inherited Accounts

The rules for inherited IRAs changed significantly with the SECURE Act (2020). Most non-spouse beneficiaries must now deplete an inherited IRA within 10 years — and in many cases must take annual distributions during those 10 years. Spouses have more flexibility, including the option to treat an inherited IRA as their own.

If you've recently inherited a retirement account, the rules are complex enough to warrant consulting a tax advisor.

A Simple Checklist

RMDs aren't something you can ignore, but with some planning they don't have to be a surprise tax bomb either. The earlier you start thinking about them, the more options you have.