Required Minimum Distributions (RMDs)

Starting at age 73, the IRS requires you to withdraw a minimum amount each year from most tax-deferred retirement accounts. This is the Required Minimum Distribution (RMD). If you miss it, the penalty is severe.

Which Accounts Require RMDs

• • Traditional IRA, SEP IRA, SIMPLE IRA
• • 401(k), 403(b), 457(b) plans
• • Inherited retirement accounts (different rules apply)

Which Accounts Don't Require RMDs

• • Roth IRA — never requires RMDs during the owner's lifetime
• • Roth 401(k) — no RMDs starting in 2024 (SECURE 2.0)
• • Regular brokerage accounts and bank savings — always your choice

How the RMD is Calculated

Divide your account balance on December 31 of the previous year by a life-expectancy factor from the IRS Uniform Lifetime Table. At age 73 the factor is 26.5, so an account with $500,000 requires an RMD of about $18,868. The factor drops each year, so the required percentage rises with age.

Still Working Exception

If you're still working at age 73 and don't own 5% or more of your employer's business, you can generally delay RMDs from your current employer's 401(k) until you retire. The rule doesn't apply to IRAs.

Tax Impact

RMDs from traditional accounts are taxed as ordinary income. Larger RMDs can push you into higher tax brackets and increase Medicare Part B premiums (IRMAA surcharges kick in above certain income levels). Consider strategies like Roth conversions in lower-income years before age 73 to smooth out future tax bills.