Required Minimum Distributions (RMDs): Basics for Retirees
Most traditional retirement accounts require you to start withdrawing money at a certain age. Learn when RMDs begin, how they are calculated and how to avoid penalties.
The short version
- RMDs generally begin at age 73 for people born from 1951 through 1959, and at 75 for those born in 1960 or later.
- Missing an RMD can trigger a penalty of 25 percent of the shortfall, reduced to 10 percent if corrected promptly.
- Qualified charitable distributions can count toward your RMD.
In this guide
If you have money in a traditional IRA, 401(k), 403(b) or similar retirement account, you cannot keep it there indefinitely. The IRS requires you to begin taking required minimum distributions (RMDs) at a certain age. Understanding the rules helps you avoid costly penalties and plan your withdrawals.
When RMDs begin
Under current law:
- If you were born from 1951 through 1959, your RMDs generally begin at age 73.
- If you were born in 1960 or later, your RMDs generally begin at age 75.
Your first RMD must be taken by April 1 of the year after you reach your RMD age. Each subsequent RMD must be taken by December 31.
If you delay your first RMD until April 1, you will need to take two RMDs in that year, which could increase your taxable income.
Which accounts have RMDs
RMDs generally apply to:
- Traditional IRAs
- SEP IRAs and SIMPLE IRAs
- 401(k), 403(b) and 457(b) plans
- Many other employer-sponsored retirement plans
RMDs do not apply to:
- Roth IRAs during the original owner's lifetime
- Roth 401(k) and Roth 403(b) accounts, beginning in 2024
The still-working exception
If you are still working and participate in your current employer's retirement plan, you may be able to delay RMDs from that plan until you retire, unless you own 5 percent or more of the business. This exception does not apply to IRAs.
How RMDs are calculated
Your RMD for each account is generally calculated by dividing the account balance on December 31 of the previous year by a life expectancy factor from IRS tables. Most people use the Uniform Lifetime Table. A different table applies if your spouse is the sole beneficiary and is more than 10 years younger.
Your account custodian often calculates the amount for you, but you are responsible for making sure it is correct and taken on time.
Multiple accounts: If you have more than one IRA, you calculate the RMD for each, but you can withdraw the total from any one or more of your IRAs. For 401(k) plans, RMDs generally must be taken separately from each plan.
Taxes on RMDs
RMDs from pre-tax accounts are generally taxed as ordinary income. They can also affect how much of your Social Security benefits are taxable and whether you pay higher Medicare premiums through IRMAA. You can ask your custodian to withhold taxes from your distribution.
Penalties for missing an RMD
If you do not take your full RMD on time, the penalty is 25 percent of the amount not withdrawn. It can be reduced to 10 percent if you correct the mistake in a timely manner, generally within two years. The IRS may waive the penalty if the shortfall was due to reasonable error and you are taking steps to fix it.
Qualified charitable distributions (QCDs)
If you are 70½ or older, you can transfer money directly from an IRA to a qualified charity. A QCD:
- Can count toward your RMD
- Is not included in your taxable income
- Has an annual limit, which is adjusted for inflation
The transfer must go directly from the IRA custodian to the charity.
Planning tips
- Set a reminder well before the December 31 deadline.
- Consider automatic withdrawals spread throughout the year.
- Coordinate RMDs with your budget and other income.
- Talk with a tax professional about strategies, such as QCDs or the timing of withdrawals before RMD age.
Terrameritavi is an independent publication and is not affiliated with the IRS. This article is general information, not tax or financial advice.
