Required Minimum Distribution
A Required Minimum Distribution (RMD) is the minimum amount the IRS mandates that holders of Traditional IRAs, 401(k)s, and most other pre-tax retirement accounts withdraw annually beginning at a specified age.
Required Minimum Distributions exist because the government allowed retirement assets to grow tax-deferred — but never intended that deferral to last forever. The IRS eventually demands its share through mandatory withdrawals that generate taxable income. Failing to take the full RMD by the deadline triggers one of the harshest tax penalties in the code: 25% of the shortfall (reduced to 10% if corrected within the 'correction window' under SECURE Act 2.0 rules).
The SECURE Act (2019) raised the RMD starting age from 70½ to 72. SECURE Act 2.0 (2022) raised it further: to age 73 for individuals who turned 72 after December 31, 2022, and to age 75 for those born in 1960 or later. The first RMD may be delayed until April 1 of the year following the year you reach the RMD starting age, but that means taking two RMDs in the same calendar year (the delayed first RMD and the second year's RMD), potentially creating a larger tax bill.
The annual RMD amount is calculated by dividing the account's December 31 prior-year balance by an IRS life expectancy factor from the Uniform Lifetime Table (Publication 590-B). As you age, the divisor shrinks and the required percentage grows. For a 73-year-old, the divisor is 26.5 (about 3.8% of balance); at 85, it is 16.0 (about 6.25%); at 90, 12.2 (about 8.2%).
RMDs apply to Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and 457(b)s. Roth IRAs are notably exempt from RMDs during the owner's lifetime — one of their most powerful estate planning advantages. Roth 401(k) and 403(b) accounts were historically subject to RMDs, but SECURE Act 2.0 eliminated that requirement starting in 2024. Inherited IRAs (Beneficiary IRAs) are subject to their own special RMD rules. Qualified Charitable Distributions (QCDs) allow taxpayers aged 70½ or older to donate up to $105,000 (2025) per year directly from their IRA to a qualified charity, satisfying the RMD obligation without recognizing the income.
SECURE Act 2.0 made the most sweeping changes to RMD rules in a generation. The starting age was raised from 72 to 73 for individuals who turned 72 after December 31, 2022, and will rise again to 75 for those born in 1960 or later. The penalty for failing to take an RMD was reduced from 50% of the shortfall to 25%, and further to 10% if the missed distribution is corrected within the two-year correction window. RMDs on Roth 401(k) accounts were eliminated starting in 2024, removing a long-standing disparity between Roth 401(k)s and Roth IRAs. For surviving spouses who inherit an IRA, new rules effective in 2024 give them the option to delay RMDs until the later of age 73 or what the deceased spouse would have reached — a significant planning improvement over prior rules.
The RMD calculation follows a straightforward formula. Each year, divide the account's December 31 prior-year balance by the life expectancy factor corresponding to your age from the IRS Uniform Lifetime Table (Publication 590-B). For a 73-year-old, the factor is 26.5, producing a required withdrawal of approximately 3.77% of the prior-year balance. At age 80, the factor is 20.2 (about 4.95%); at age 90, 12.2 (about 8.2%). When a spouse more than 10 years younger is the sole beneficiary, the taxpayer may use the longer Joint Life and Last Survivor Expectancy Table, which produces a smaller RMD. Account holders with multiple IRAs must calculate the RMD for each account separately but may aggregate and satisfy the total from any one or combination of their IRAs. Employer plan RMDs — from 401(k)s and 403(b)s — must be satisfied from each plan independently.
The penalty for missing an RMD stands at 25% of the amount that should have been distributed, imposed as an excise tax via IRS Form 5329. Under SECURE Act 2.0, this drops to 10% if the missed RMD is taken and reported during the two-year correction window. In practice, the IRS has historically shown willingness to waive the penalty for first-time failures accompanied by a reasonable cause explanation letter, but this is discretionary and not guaranteed. The most common trigger for a missed RMD is the first year of RMD eligibility — particularly when the taxpayer delays the first RMD to April 1 of the following year and then forgets to take the second RMD by December 31 of that same year, resulting in two RMDs due in one calendar year.
RMD Calculation Table: A simplified version of the IRS Uniform Lifetime Table shows how the required distribution percentage increases with age. At age 73, the distribution factor is 26.5 (withdraw 3.77%). At 75, the factor is 24.6 (4.07%). At 80, it is 20.2 (4.95%). At 85, 16.0 (6.25%). At 90, 12.2 (8.20%). At 95, 9.6 (10.42%). At 100, 7.6 (13.16%). To calculate the actual dollar amount, multiply the December 31 prior-year account balance by the percentage. For example, an IRA with a December 31 balance of $600,000 and a factor of 24.6 (age 75) has an RMD of $600,000 / 24.6 = $24,390 for that year. These factors are from the most recent updated tables (effective January 2022), which use longer life expectancy assumptions than earlier versions and therefore produce slightly smaller RMDs than the prior tables.
Strategies to Reduce RMDs: Large pre-tax retirement account balances generate large RMDs that can push retirees into higher tax brackets, increase Medicare premiums through IRMAA surcharges, and make more Social Security benefits taxable. Several proactive strategies can reduce future RMD levels. First, Roth conversions during the gap years between retirement and RMD onset (typically ages 60-72) reduce the pre-tax IRA balance subject to RMDs, substituting future tax-free Roth distributions for taxable RMDs. Second, Qualified Charitable Distributions (QCDs) allow up to $105,000 per year to be sent directly from an IRA to a qualified charity, satisfying the RMD obligation without the distribution counting as taxable income — particularly valuable for charitably inclined retirees above the standard deduction threshold. Third, continuing to work for an employer plan past age 73 and keeping funds in that employer's 401(k) (not rolling to an IRA) can defer RMDs on that balance until actual retirement under the 'still-working exception' — available only for employer plan assets, not IRAs. Fourth, naming a spouse as beneficiary allows the surviving spouse to roll the inherited IRA into their own IRA and restart the RMD clock based on their own age.