What Are Required Minimum Distributions (RMDs) and How Do You Avoid the Penalties?

If you have a traditional 401(k) or traditional IRA, the IRS eventually requires you to start withdrawing money — whether you need it or not. These mandatory withdrawals are called Required Minimum Distributions (RMDs), and getting them wrong triggers one of the steepest penalties in the entire tax code. Here's exactly how they work.

What Is a Required Minimum Distribution?

A Required Minimum Distribution is the minimum amount you must withdraw each year from tax-deferred retirement accounts once you reach a certain age. The IRS lets your money grow tax-deferred for decades, but eventually wants its share — RMDs force you to start withdrawing (and paying income tax on) that money.

RMDs apply to accounts where you got a tax break going in: traditional IRAs, traditional 401(k)s, 403(b)s, and similar employer plans. Roth IRAs are exempt from RMDs during the original owner's lifetime, since you already paid taxes on that money.

At What Age Do RMDs Start?

The RMD starting age has changed twice in recent years due to the SECURE Act and SECURE 2.0:

Birth Year	RMD Starting Age
Before 1951	72 (already required)
1951–1959	73
1960 or later	75

Your first RMD must be taken by April 1 of the year after you reach your RMD age. Every RMD after that must be taken by December 31 of that year. If you delay your first RMD to the following April, you'll have to take two RMDs in that same calendar year — which can push you into a higher tax bracket, so most people take their first RMD in the year they turn the RMD age instead.

How Is Your RMD Calculated?

Your RMD is calculated using this formula:

RMD = Account Balance (as of Dec 31 last year) ÷ IRS Life Expectancy Factor

The life expectancy factor comes from IRS tables based on your age (the "Uniform Lifetime Table" for most people). As you get older, the factor decreases, which means the percentage of your account you must withdraw each year increases.

Age	Life Expectancy Factor	Approx. % Withdrawn
73	26.5	3.77%
75	24.6	4.07%
80	20.2	4.95%
85	16.0	6.25%
90	12.2	8.20%

Example: if you're 75 with $500,000 in your traditional IRA, your RMD would be $500,000 ÷ 24.6 = approximately $20,325 for that year.

What Happens If You Miss an RMD?

This is where RMDs get serious. If you fail to withdraw the full required amount by the deadline, the IRS charges an excise tax on the shortfall:

• 25% penalty on the amount you should have withdrawn but didn't
• Reduced to 10% if you correct the mistake within two years

This was reduced from a brutal 50% penalty under the SECURE 2.0 Act, but it's still one of the harshest penalties in the tax code for a simple oversight. If you miss an RMD, correct it as soon as possible and consider filing Form 5329 with a reasonable-cause explanation — the IRS will sometimes waive the penalty for a genuine, corrected mistake.

Do RMDs Apply to Every Account You Own?

RMDs are generally calculated per account type, but the withdrawal rules differ slightly:

• Traditional IRAs: you can calculate the RMD for each IRA separately, then withdraw the total from any one IRA or a combination — you don't need to withdraw from each account individually.
• 401(k)s and 403(b)s: each employer plan's RMD must be withdrawn from that specific plan — you can't combine 401(k) RMDs with IRA RMDs.
• Roth IRAs: no RMDs required during the original owner's lifetime.
• Roth 401(k)s: as of 2024, these are also RMD-free during the owner's lifetime, thanks to SECURE 2.0.

Are You Still Working? You May Get an Exception

If you're still working past your RMD age and don't own more than 5% of the company, you can generally delay RMDs from your current employer's 401(k) until you actually retire — this is called the "still-working exception." It doesn't apply to IRAs or to 401(k)s from previous employers, only your current employer's plan, and only if the plan allows it.

Are RMDs Taxable?

Yes. RMDs from traditional IRAs and 401(k)s are taxed as ordinary income in the year you take them, added to your other income for the year. This can push retirees into a higher tax bracket or trigger higher Medicare premiums (IRMAA surcharges) if the RMD is large enough to push your income over certain thresholds.

This is one reason many people convert portions of a traditional IRA to a Roth IRA in the years before RMDs begin — reducing the traditional balance (and future RMDs) while paying taxes at a potentially lower rate now.

Can You Reduce Your RMDs?

A few legitimate strategies can lower your future RMD amount or its tax impact:

• Roth conversions before RMD age — converting traditional funds to Roth in lower-income years reduces the traditional balance subject to future RMDs.
• Qualified Charitable Distributions (QCDs) — if you're 70½ or older, you can donate up to $108,000 (2026 limit) directly from your IRA to a qualified charity. This counts toward your RMD but isn't included in your taxable income.
• Delaying Social Security — spending down traditional IRA funds early in retirement (before RMDs start) while delaying Social Security can reduce the account balance subject to future RMDs.

Curious how RMDs might affect your own retirement income down the road?

📊 401(k) Calculator

Project your retirement balance and see how it grows — the same balance that RMDs will eventually apply to.

Try the 401(k) Calculator →

Common RMD Mistakes to Avoid

• Forgetting the deadline — December 31 each year (April 1 only for your very first RMD).
• Taking the wrong amount — using an outdated life expectancy factor or the wrong account balance.
• Withdrawing from the wrong 401(k) — each employer plan's RMD must come from that plan, unlike IRAs.
• Not planning ahead with Roth conversions — waiting until RMD age to think about tax strategy is often too late to make a meaningful difference.
• Ignoring IRMAA thresholds — a large RMD can unexpectedly increase your Medicare Part B and D premiums for the following year.

Bottom Line

RMDs are one of the few truly non-negotiable rules in retirement planning — miss one, and the penalty is steep. The good news is they're predictable and easy to plan around well in advance. If you have significant traditional retirement savings, it's worth thinking about your RMD strategy years before they actually start, not the year they do.