Required Minimum Distributions 101
If you've ever wondered why you can't just leave your retirement savings invested indefinitely, you are not alone. Required Minimum Distributions, or RMDs, are the minimum amounts the IRS requires you to withdraw each year from certain retirement accounts once you reach a specific age. Most people spend decades contributing to tax-deferred accounts without thinking much about the withdrawal side of the equation, but eventually, the IRS wants its share.
This matters for anyone with a traditional 401(k), 403(b), or IRA, but it carries extra weight for high earners and tech professionals who have stacked years of contributions, employer matches, and rollovers into these accounts. A larger balance can mean a larger required withdrawal and a larger tax bill if you're not planning ahead.
In this post, we'll cover what RMDs are, who has to take them and when, how they're calculated, and what happens if you miss one.
Key takeaway: RMDs are mandatory annual withdrawals from certain retirement accounts, starting at age 73 for most people today (75 for those born in 1960 or later). Missing one triggers a penalty, but the calculation and timing are both predictable once you know the rules.
Who Has to Take RMDs, and When?
Your RMD start age depends on your birth year. If you were born in 1950 or earlier, you should already be taking RMDs under the older rules. If you were born between 1951 and 1959, your RMD age is 73. If you were born in 1960 or later, your RMD age will be 75, once that rule takes effect in 2033.
Your first RMD has a slightly unusual deadline. You have until April 1 of the year after you reach your RMD age to take it. Every RMD after that is due by December 31 of each year.
Delaying the first RMD. If you push your first withdrawal to that April 1 deadline, you'll need to take a second RMD by December 31 of that same year. That means two taxable distributions in one calendar year, which can push you into a higher tax bracket.
Turning 72 or 73 today. Someone turning 73 in 2026 has until April 1, 2027 to take their first RMD.
Upside: Delaying gives your account more time to grow before you're forced to withdraw. Downside: it can double up your taxable income in the year you finally start.
What Are Required Minimum Distributions (RMDs)?
Required Minimum Distributions are the minimum amounts the IRS requires you to withdraw each year from certain retirement accounts once you reach a specific age. They exist because traditional retirement accounts grow tax-deferred, and the IRS eventually needs you to start withdrawing and paying tax on that money.
RMDs apply to:
Traditional IRAs
401(k) and 403(b) plans
SEP and SIMPLE IRAs
Inherited retirement accounts (with their own separate rules)
RMDs do not apply to Roth IRAs during the original owner's lifetime. As of 2024, they also no longer apply to Roth 401(k) accounts.
How Is Your RMD Calculated?
Your RMD is calculated by dividing your account balance as of December 31 of the previous year by a life expectancy factor from the IRS Uniform Lifetime Table. The older you get, the smaller that factor becomes, which means a larger percentage of your account is required out each year.
A few practical points:
Multiple IRAs. You calculate the RMD for each IRA separately, but you can withdraw the total from any one account or a combination of them.
Multiple 401(k)s. Unlike IRAs, each 401(k) or 403(b) plan requires its own separate withdrawal. You can't combine them the way you can with IRAs.
Growth doesn't pause the requirement. Even in a year your account grows significantly, the RMD is still based on the prior year-end balance and your applicable factor.
Special Cases: Roth Accounts and Inherited Accounts
Roth IRAs and, since 2024, Roth 401(k)s are not subject to RMDs during the original owner's lifetime. This is one reason some tech employees prioritize Roth contributions or Roth conversions earlier in their careers, particularly through vehicles like a mega backdoor Roth.
Inherited retirement accounts follow a different, more complicated set of rules. Most non-spouse beneficiaries who inherit a retirement account after 2019 are required to withdraw the entire account within 10 years, and in many cases must also take annual RMDs during that window depending on whether the original owner had already started their own RMDs.
Upside: Roth accounts let your money grow without a forced withdrawal schedule. Downside: inherited account rules are genuinely complex, and getting the timing wrong can trigger penalties.
What Happens if You Miss an RMD?
Missing an RMD deadline triggers an excise tax penalty of 25% on the amount you should have withdrawn but didn't. That penalty drops to 10% if you correct the mistake within two years by withdrawing the missed amount and filing the appropriate form with your tax return.
This penalty was significantly higher in the past, at 50%, so the current rules are more forgiving than they used to be. That said, a 25% penalty on a large 401(k) balance is still a meaningful number, and it's one worth avoiding through proactive planning rather than after-the-fact correction.
Strategies and Planning Considerations
RMDs are predictable once you know your numbers, which means most of the planning happens well before your first required withdrawal. Consider the following:
Model your RMDs before you reach the trigger age. Projecting future account balances and estimated RMD amounts can help you understand the tax impact years in advance, rather than being surprised by it.
Consider Roth conversions in lower-income years. Converting traditional retirement funds to a Roth account before RMDs begin can reduce your future required withdrawals, though the conversion itself is taxable in the year it happens and should be weighed against your current tax bracket.
Coordinate RMDs with other income sources. If you're also drawing Social Security or other income in retirement, timing your RMDs thoughtfully can help manage which tax bracket you land in.
Look into qualified charitable distributions (QCDs). If you're charitably inclined, a QCD lets you direct part of your RMD straight to a qualified charity, which can reduce your taxable income.
Collaborate with a tax or financial professional. RMD rules intersect with tax brackets, Medicare premiums, and estate planning in ways that are highly specific to your situation, and a professional can help you build a withdrawal strategy that fits your broader financial picture.
FAQ: Required Minimum Distributions
Do Roth IRAs have RMDs?
No. Roth IRAs are not subject to RMDs during the original owner's lifetime, and as of 2024, Roth 401(k)s are exempt as well.
What if I don't need the money from my RMD?
You're still required to withdraw it, but you can reinvest it in a taxable brokerage account or, if you're charitably inclined, direct it to a qualified charity through a QCD.
Can I take my full RMD from just one of my retirement accounts?
If you have multiple IRAs, yes. You can calculate each IRA's RMD separately and withdraw the total from any single IRA or combination of them. This does not apply to 401(k) or 403(b) plans, which each require their own separate withdrawal.
The Bottom Line
RMDs can feel like an abstract, far-off rule when retirement is still decades away. But the accounts you're building now, especially if you're contributing aggressively through a 401(k) or mega backdoor Roth, are exactly the accounts these rules will eventually apply to.
Understanding the age thresholds, the calculation method, and the penalty for missing a deadline gives you a real planning advantage. The earlier you factor RMDs into your long-term tax strategy, the more flexibility you may have when the time comes.
If you'd like help thinking through how Required Minimum Distributions fit into your retirement plan, our team at DiversiFi can help you review your strategy.
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