Required Minimum Distributions (RMD) Explained

For decades you've been told to save in your 401(k) and traditional IRA, watching the balances grow tax-deferred. But the IRS was always going to collect its share eventually. That moment arrives in the form of Required Minimum Distributions, or RMDs: the mandatory annual withdrawals you must take from most tax-deferred retirement accounts once you reach a certain age. Skip one, and the penalty has historically been one of the steepest in the entire tax code.

This guide explains exactly what an RMD is, why the starting age is now 73 thanks to the SECURE 2.0 Act, how the calculation actually works (it's a simple division you can do yourself), which accounts are exempt, and the timing strategies that can save you thousands. We'll walk through two complete worked examples, at age 73 and age 75, so you can see the numbers in motion.

This article is for general informational and educational purposes only and is not professional tax or financial advice. Consult a qualified tax professional or financial advisor about your specific situation.

What Is a Required Minimum Distribution?

A Required Minimum Distribution is the smallest amount you are legally required to withdraw from your tax-deferred retirement accounts each year, beginning in the year you turn 73. The government allowed your contributions and growth to compound for decades without taxation, and RMDs are how it finally collects the income tax that was deferred all along.

RMDs apply to tax-deferred (pre-tax) accounts, including:

• Traditional IRAs, including SEP and SIMPLE IRAs
• Traditional 401(k), 403(b), and 457(b) plans
• Thrift Savings Plan (TSP) accounts
• Inherited retirement accounts (these follow their own, often stricter, rules)

The amount you withdraw is added to your taxable income for the year and taxed at your ordinary income tax rate. You can always take out more than the required minimum, but the RMD is the floor you cannot go below without triggering a penalty.

The New RMD Age: 73 Under SECURE 2.0

The starting age for RMDs has changed twice in recent years, which is a common source of confusion. The SECURE 2.0 Act of 2022 set the current rules:

• If you were born between 1951 and 1959, your RMDs begin at age 73.
• If you were born in 1960 or later, your RMD age rises to 75 (beginning in 2033).

For nearly everyone reaching retirement age right now, 73 is the magic number. The year you turn 73, you have an RMD obligation for that calendar year.

There is one helpful timing wrinkle for your very first RMD. You're allowed to delay your first distribution until April 1 of the year after you turn 73. Every RMD after that is due by December 31 of its year. Be careful, though: delaying your first RMD into the next year means you'd take two RMDs in a single tax year (the delayed first one plus the on-time second one), which can spike your taxable income. We'll cover why that matters in the strategy section.

How RMDs Are Calculated

The math behind an RMD is refreshingly simple. There are only two ingredients:

RMD = Prior Year-End Account Balance ÷ IRS Life Expectancy Factor

Let's break down each piece:

• Prior year-end balance. You use the fair market value of your account on December 31 of the previous year. For your 2025 RMD, you use your December 31, 2024 balance.
• Life expectancy factor. This comes from the IRS Uniform Lifetime Table, which assigns a divisor to each age. The factor represents your remaining life expectancy in years. As you age, the factor shrinks, so a larger percentage of your account must be withdrawn each year.

Here are several factors from the IRS Uniform Lifetime Table to anchor the examples below. (Most retirees use this table; a different one applies only if your sole beneficiary is a spouse more than 10 years younger than you.)

Notice the pattern: the required percentage steadily climbs with age. At 73 you must withdraw under 4% of your balance, but by 90 the requirement exceeds 8%. Rather than look up factors and divide by hand each year, you can let our RMD Calculator pull the correct factor for your age and compute the figure instantly.

Worked Example 1: Your First RMD at Age 73

Meet Robert, who turns 73 in 2025. On December 31, 2024, his traditional IRA was worth $500,000. Here's how his first RMD is calculated.

Step 1 - Find his life expectancy factor. At age 73, the Uniform Lifetime Table factor is 26.5.

Step 2 - Divide the balance by the factor.

• $500,000 ÷ 26.5 = $18,868 (rounded)

So Robert must withdraw at least $18,868 from his IRA during 2025. That amount is added to his taxable income for the year. If he's in the 22% federal bracket, the distribution adds roughly $4,151 to his federal tax bill, before any state tax.

Because this is his first RMD, Robert technically could wait until April 1, 2026 to take it. But if he does, he'd also owe his 2026 RMD by December 31, 2026, stacking two distributions into one tax year. Many retirees choose to take the first RMD on time in 2025 to keep their income smoother.

Worked Example 2: A Larger RMD at Age 75

Now let's fast-forward to Robert at age 75. Suppose his IRA has grown despite his withdrawals, and on the prior December 31 it was worth $520,000. At 75, the Uniform Lifetime factor drops to 24.6.

RMD = $520,000 ÷ 24.6 = $21,138 (rounded)

This table shows how the two ingredients combine to produce a larger required withdrawal even though the balance grew only modestly:

The takeaway is that RMDs grow over time on two fronts: a shrinking divisor forces out a higher percentage, and a growing balance enlarges the base. This is why RMDs can quietly push retirees into higher tax brackets in their late 70s and 80s, a problem worth planning for early. You can project how your own balance and withdrawals evolve using the RMD Calculator alongside the 401(k) Calculator.

The Penalty for Missing an RMD

The IRS takes RMDs seriously, and the penalty for a shortfall has long been one of the harshest in the tax code. If you fail to withdraw the full required amount, you owe an excise tax on the amount you failed to take out, not on the whole account.

Here's the good news: SECURE 2.0 reduced this penalty. The old rate was a brutal 50% of the shortfall. As of 2023, the penalty dropped to 25%, and it falls further to just 10% if you correct the mistake within a defined window (generally by the end of the second year after the missed RMD) and file the proper paperwork.

For example, if your RMD was $20,000 and you only withdrew $12,000, you fell $8,000 short. Under the 25% penalty, that's a $2,000 excise tax, on top of the ordinary income tax you'll still owe once you take the distribution. If you catch and correct it promptly, the penalty could shrink to $800. The lesson is clear: if you ever realize you've missed an RMD, fix it immediately and consult a tax professional about filing IRS Form 5329 to request relief.

Roth Accounts: A Key Exemption

One of the most valuable RMD facts is this: Roth IRAs are completely exempt from RMDs during the original owner's lifetime. Because you funded a Roth IRA with after-tax dollars, the IRS has no deferred income to collect, so it never forces you to withdraw. Your Roth IRA can keep growing tax-free for your entire life and pass to heirs.

A few important nuances:

• Roth IRAs have no RMDs for the original owner, ever. This makes them a powerful estate-planning and tax-flexibility tool.
• Roth 401(k)s used to require RMDs, but thanks to SECURE 2.0, Roth 401(k) and Roth 403(b) accounts are no longer subject to RMDs starting in 2024, bringing them in line with Roth IRAs.
• Inherited Roth accounts do face distribution rules for most non-spouse beneficiaries, even though the original owner did not.

This exemption is a major reason many savers consider Roth conversions in their 60s, moving money from a traditional IRA to a Roth before RMDs begin. You can explore how Roth contributions and conversions affect your future tax picture with our Roth IRA Calculator.

Smart RMD Timing Strategies

RMDs are mandatory, but how and when you handle them is flexible. A few strategies can meaningfully lower your lifetime tax bill:

• Do Roth conversions in your 60s. The years between retirement and age 73, often a low-income window, are prime time to convert traditional IRA dollars to a Roth. You pay tax now at a lower rate and permanently shrink the balance that will be subject to future RMDs.
• Don't always delay your first RMD. While you can postpone your first distribution to April 1 of the following year, doubling up two RMDs in one tax year can push you into a higher bracket and raise Medicare premiums (IRMAA). Taking the first RMD on time is often the smoother choice.
• Use Qualified Charitable Distributions (QCDs). If you're charitably inclined and at least 70½, you can send up to a generous annual limit (indexed for inflation) directly from your IRA to a qualified charity. A QCD counts toward your RMD but is excluded from your taxable income, a tax win the standard deduction can't match.
• Reinvest what you don't need. You must withdraw the RMD, but you don't have to spend it. After paying the tax, you can reinvest the remainder in a regular taxable brokerage account.
• Withhold taxes from the distribution. You can have federal tax withheld directly from your RMD, which can satisfy your estimated-tax obligations for the year and is often simpler than making quarterly payments.

Because the 2025 standard deduction is $15,750 for single filers and $31,500 for those married filing jointly, a portion of your RMD income may be offset by the deduction, especially if it's your main source of taxable income. Running the numbers ahead of time helps you decide how much, if any, extra to withdraw in lower-income years.

The Bottom Line

Required Minimum Distributions are the IRS finally collecting on decades of tax deferral. Under SECURE 2.0, they begin at age 73 for most of today's retirees, and the calculation is simply your prior year-end balance divided by the IRS Uniform Lifetime factor for your age. As you get older, that factor shrinks and the required percentage rises, which is why proactive planning, especially Roth conversions before 73, can pay off handsomely.

Remember the essentials: Roth IRAs are exempt for the original owner, the penalty for missing an RMD is now 25% (and as low as 10% if corrected promptly), and the December 31 deadline is firm after your first year. Estimate your own required withdrawal with our RMD Calculator, project your account growth with the 401(k) Calculator, and weigh the tax-free advantages of Roth savings with the Roth IRA Calculator. A little planning today keeps far more of your nest egg working for you.