A Required Minimum Distribution (RMD) is the minimum amount the IRS mandates you withdraw each year from certain taxdeferred retirement accounts once you reach a specific age. These accounts—such as traditional IRAs and 401(k)s—are funded with pretax dollars, so the IRS eventually requires withdrawals to ensure taxes are collected on both contributions and investment gains. RMDs exist to prevent retirement accounts from becoming indefinite tax shelters and to ensure the funds are ultimately used for retirement income rather than accumulating taxfree indefinitely.
RMD rules are designed to balance the tax benefits of retirement savings with the IRS’s need to eventually tax those dollars. While taxdeferred accounts help savers build wealth efficiently, Congress determined that allowing funds to grow without ever being taxed would undermine the purpose of retirementfocused tax incentives. As individuals age, RMDs ensure that assets begin flowing out of sheltered accounts and into taxable income streams. This structure prevents people from using retirement plans solely as longterm estate vehicles and aligns with the intent that these accounts support retirement spending.
Most taxdeferred accounts fall under RMD rules, including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, 457(b)s, and the federal Thrift Savings Plan. While each type of account requires its own RMD calculation, the rules differ when it comes to how those withdrawals can be taken. If you own multiple traditional IRAs (including SEP and SIMPLE IRAs), you may calculate the RMD for each account separately but take the total RMD amount from any one, or a combination, of your IRAs. However, employersponsored plans such as 401(k)s and 403(b)s must have their RMDs taken from each individual account, meaning their withdrawals cannot be combined or satisfied from another plan.
Roth IRAs are exempt from RMD requirements for original owners because contributions were made with aftertax dollars. Additionally, beginning in 2024, RMDs are no longer required for Roth 401(k) and Roth 403(b) accounts, expanding taxfree flexibility for retirees using employer plans.
RMD calculations begin with the account balance from December 31 of the previous year. The IRS then applies a lifeexpectancy factor based on its Uniform Lifetime Table to determine the minimum withdrawal amount. Larger balances and longer life expectancies result in higher required distributions. Gaining a solid understanding of these rules, or partnering with a financial professional, can help ensure you stay compliant and avoid unnecessary penalties.
The age at which RMDs start has changed due to legislation. Under the SECURE Act (2019) and SECURE Act 2.0 (2022), the rules now hinge on your birth year. Individuals born 1951–1959 must begin RMDs at age 73, and those born after 1959 begin at age 75. Your first RMD can be postponed until April 1 of the following year, but all other annual withdrawals must occur by December 31. These updated ages give retirees additional time to grow their savings before mandatory withdrawals begin.
The penalty for missing an RMD used to be among the steepest in the tax code. Historically, failing to withdraw the required amount triggered a 50% excise tax. Under SECURE Act 2.0, this penalty has been significantly reduced to 25%, and it can fall to 10% if corrected promptly. While the rules are now more forgiving, the consequences remain serious enough to justify careful planning and recordkeeping, especially for retirees with multiple retirement accounts.
There are a different set of distribution rules for retirement accounts that are inherited and these rules have changed over time. Earlier rules often allowed beneficiaries to stretch withdrawals over their life expectancy, while more recent legislation requires many nonspouse beneficiaries to distribute the account within a 10-year time period. Spouses and certain eligible beneficiaries may have alternative options. Because the rules differ based on when the account was inherited and the type of beneficiary, it’s important for heirs to understand which framework applies to them and ensure a thoughtful approach to taking RMDs is implemented. This will assist in avoiding unnecessary penalties for failing to take a distribution and can help prevent future tax issues that could be created by waiting too long to take distributions from the inherited accounts.
RMDs play an important role in tax planning, retirement income strategy, and estate considerations. Because RMD withdrawals count as ordinary income, they can influence your tax bracket, Medicare premiums, and eligibility for certain credits or deductions. Coordinating RMD timing with other income sources may help smooth tax exposure and minimize surprises. RMDs also shape what remains invested for heirs, as required withdrawals naturally reduce account balances over time. For many retirees, understanding RMD rules is a key part of maintaining a predictable, efficient retirement strategy.
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