Learn About IRA Required Minimum Distributions

What Are Required Minimum Distributions and Why They Matter

A Required Minimum Distribution, or RMD, is the amount of money the IRS requires you to withdraw from certain retirement accounts each year once you reach a specific age. Think of it this way: the government gave you tax advantages when you saved money in these accounts, and now they want to make sure you actually start using that money during your lifetime rather than passing it all to heirs tax-free.

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For most people, RMDs begin at age 73 as of 2023 (this changed from age 72 due to the Secure 2.0 Act). The exact amount you must withdraw depends on your account balance and your age. The IRS provides tables to calculate this amount, which we'll explore in detail later in this guide. If you don't take your RMD, the penalty is steep: the IRS charges 25% of the amount you should have withdrawn but didn't (reduced to 10% if you correct the error within two years).

RMDs apply to several types of retirement accounts, including traditional IRAs, SEP IRAs, SIMPLE IRAs, and inherited IRAs. They do not apply to Roth IRAs while the original owner is alive, which is one reason many people find Roth accounts attractive. RMDs also don't apply to employer retirement plans like 401(k)s while you're still working at that company (with some exceptions for highly compensated employees).

Understanding RMDs matters because missing one—even accidentally—can result in serious penalties. Many people overlook this requirement because they're focused on other retirement concerns, but it's a mandatory part of retirement account management that deserves attention. This guide walks through the mechanics of RMDs so you can understand how they work and plan accordingly.

Takeaway: RMDs are mandatory annual withdrawals from certain retirement accounts starting at age 73, with significant penalties for non-compliance. Knowing whether your accounts are subject to RMDs is the first step in managing this requirement.

Which Retirement Accounts Require Minimum Distributions

Not every retirement account has RMD requirements. Understanding which of your accounts fall under this rule is essential because it determines what you need to track and manage each year. The accounts subject to RMDs are largely those that received tax deductions when you contributed to them—the government is essentially saying you had a tax benefit, and now they want their due by forcing distributions.

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Traditional IRAs are the most common accounts subject to RMDs. If you contributed money to a traditional IRA and deducted those contributions from your taxes, you'll have RMD obligations. SEP IRAs (Simplified Employee Pension IRAs) and SIMPLE IRAs also trigger RMDs. These are employer-sponsored plans that function similarly to traditional IRAs in terms of how they're taxed and withdrawn.

Employer-sponsored plans like 401(k)s, 403(b)s, and 457 plans also have RMD requirements, though there's an important exception: if you're still working for the employer sponsoring the plan and don't own 5% or more of the company, you may be able to delay RMDs until you actually retire. This is called the "still-working exception." Once you leave that employer, however, RMDs begin at the required age.

Inherited retirement accounts have their own RMD rules that differ based on your relationship to the person who originally owned the account and when they passed away. A spouse who inherited an IRA may be able to treat it as their own and delay RMDs. Non-spouse beneficiaries, however, face much stricter distribution timelines under rules created by the Secure Act (passed in 2019). These inherited account rules are complex and deserve special attention if you've recently inherited a retirement account.

Notably, Roth IRAs do not require distributions while the original account owner is alive. This is a major advantage of Roth accounts and is one reason financial planners often recommend them for people who don't need the money immediately in retirement. However, if you inherit a Roth IRA, RMD rules may still apply to you as a beneficiary.

Takeaway: RMDs apply to tax-deductible retirement accounts (traditional IRAs, SEP IRAs, SIMPLE IRAs) and employer plans (401(k)s, 403(b)s, 457 plans). Roth IRAs are exempt while the owner is alive. Knowing which of your accounts are subject to RMDs prevents you from missing a required withdrawal.

The Age When RMDs Begin and How It Changed

The age at which you must start taking RMDs has shifted in recent years, and understanding the current rule is crucial for planning. As of 2023, RMDs begin at age 73. This is a relatively recent change. For many years, RMDs started at age 70½, then moved to age 72 with the passage of the SECURE Act in 2019. The jump to age 73 came from the SECURE 2.0 Act, signed into law in December 2022.

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The schedule for future increases is already set. The RMD age will continue to rise: it moves to age 74 in 2029 and age 75 in 2033. This gradual increase reflects changes in life expectancy and gives people more time to let their retirement savings grow before mandatory withdrawals begin. If you were born in 1950 or earlier, your RMD age may have already started (depending on your exact birthday and when you turned the required age). If you were born between 1951 and 1959, age 73 applies to you. Those born in 1960 or later will see the higher ages apply.

The first year you must take an RMD has a special rule worth noting. You can delay your very first RMD until April 1 of the year following the year you turn the RMD age. So if you turn 73 in 2024, you could wait until April 1, 2025 to take your first distribution. However, taking advantage of this delay means you'd have to take two RMDs in 2025 (one for 2024 and one for 2025), which could push you into a higher tax bracket that year. Many financial advisors recommend taking your first RMD in the year you turn the required age rather than delaying, but this depends on your individual tax situation.

It's important to note that if you're still working at age 73, you may be able to delay RMDs from your current employer's plan (not your IRA), as long as you don't own 5% or more of the company. This still-working exception only applies to your current employer's retirement plan, not to IRAs from previous employers or other accounts.

Takeaway: RMDs currently begin at age 73 and will increase to age 74 in 2029 and age 75 in 2033. Your first RMD can be delayed until April 1 of the following year, but this creates a double-withdrawal situation. Plan which year to take your first RMD based on your personal tax situation.

How to Calculate Your Required Minimum Distribution Amount

Calculating your RMD might sound complicated, but it follows a straightforward formula: divide the balance of your retirement account on December 31 of the previous year by a number found in IRS life expectancy tables. The IRS publishes three different tables depending on your situation, and using the wrong one could result in taking too little (triggering a penalty) or too much (creating unnecessary tax liability).

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For most people—those whose spouse is not significantly younger—you'll use the Uniform Lifetime Table. This table assigns a "distribution period" based on your age. At age 73, the distribution period is 26.5. At age 80, it's 20.2. At age 90, it's 11.9. As you age, the number gets smaller, which means the percentage of your account you must withdraw increases each year. The logic is simple: the older you are, the fewer years remain in your statistical life expectancy, so you need to withdraw more annually.

Here's a concrete example: suppose you're 73 years old in 2024 and your IRA balance on December 31, 2023 was $500,000. Using the Uniform Lifetime Table, the distribution period at age 73 is 26.