Missing your RMD deadline can trigger a penalty of up to 25% of the amount you were supposed to withdraw — here’s how to stay ahead of it.
According to the IRS, tens of thousands of retirement account holders miss or miscalculate their Required Minimum Distributions every year — often paying thousands of dollars in unnecessary penalties as a result. If you have a traditional IRA, a 401(k), or most other tax-deferred retirement accounts, the federal government eventually requires you to start taking money out, whether you need it or not.
Understanding how RMDs work isn’t optional once you hit your mid-60s. It’s one of the most critical retirement planning moves you’ll make, and the rules changed significantly with the SECURE 2.0 Act. Get this wrong, and the IRS will take a bigger bite than necessary. Get it right, and you can manage your tax bill strategically for decades.
In this guide, you’ll learn exactly what RMDs are, how they’re calculated, when they start, common mistakes that cost retirees real money, and what alternatives can help you minimize the tax hit.
What Are Required Minimum Distributions and How Do They Work?
A Required Minimum Distribution is the minimum amount the IRS requires you to withdraw from most tax-deferred retirement accounts each year once you reach a certain age. The government allowed you to defer taxes on contributions and growth for decades — RMDs are how it eventually collects that deferred tax revenue.
RMDs apply to the following account types:
- Traditional IRAs
- 401(k), 403(b), and 457(b) plans
- SEP IRAs and SIMPLE IRAs
- Most inherited IRAs and inherited 401(k)s
Roth IRAs are the major exception. Because Roth contributions are made with after-tax dollars, you are not required to take RMDs from your own Roth IRA during your lifetime. However, Roth 401(k)s did have RMD requirements until the SECURE 2.0 Act eliminated them starting in 2024.
The IRS calculates your RMD using your account balance as of December 31 of the prior year, divided by a life expectancy factor from IRS Publication 590-B. The most commonly used table is the Uniform Lifetime Table, which estimates how long you’re expected to live and spreads out withdrawals accordingly.
For example, if your traditional IRA balance was $500,000 on December 31 of the prior year and your IRS life expectancy factor at age 74 is 25.5, your RMD for that year would be approximately $19,608.
When Do RMDs Start? Key Age Rules After SECURE 2.0
The SECURE 2.0 Act — signed into law in December 2022 — made significant changes to the RMD starting age. According to the IRS, the required beginning date (RBD) now depends on your birth year:
- Born before 1951: RMDs began at age 70½ (old rule)
- Born 1951–1959: RMDs begin at age 73
- Born 1960 or later: RMDs begin at age 75
Your first RMD must be taken by April 1 of the year following the year you reach your RMD starting age. Every subsequent RMD must be taken by December 31 of each year.
One important nuance: if you delay your first RMD until April 1, you’ll have to take two RMDs in that same calendar year — the one you delayed plus the one due by December 31. That double distribution could push you into a higher tax bracket, so it’s often smarter to take the first RMD in the year you turn the required age.
There’s also a still-employed exception for 401(k) accounts. If you’re still working and don’t own more than 5% of the company, you may be able to delay RMDs from your current employer’s 401(k) until you retire, regardless of your age. This does not apply to traditional IRAs.
How to Calculate Your RMD Step by Step
Calculating your RMD is straightforward once you understand the formula. Here’s a step-by-step breakdown:
- Find your account balance: Use the balance of your tax-deferred retirement account(s) as of December 31 of the previous year. Check your year-end account statement.
- Determine your life expectancy factor: Look up your age in IRS Publication 590-B, Appendix B. For most account holders, you’ll use the Uniform Lifetime Table. If your sole beneficiary is your spouse and they are more than 10 years younger than you, you use the Joint Life and Last Survivor Expectancy Table, which gives you a larger divisor and thus a smaller required withdrawal.
- Divide your balance by the factor: Account Balance ÷ Life Expectancy Factor = Your RMD
- Repeat for each account: If you have multiple traditional IRAs, you calculate each separately but can withdraw the total from any one or combination of IRA accounts. 401(k) RMDs must be taken separately from each plan.
Most major brokerages — including Fidelity, Vanguard, and Schwab — offer free RMD calculators on their websites. Your custodian may also send you an annual RMD notice. However, always verify the calculation yourself, since you are personally responsible for taking the correct amount.
If you want to plan proactively for your distributions, pairing your RMD strategy with a broader retirement income plan is essential. Our guide on Social Security Optimization: Maximize Your Benefits can help you coordinate your Social Security timing with RMDs to reduce your overall tax burden.
The Real Cost of RMDs: Taxes, Medicare, and More
RMDs are taxed as ordinary income in the year you take them. Depending on how large your account is, this can have cascading financial consequences that go beyond just the income tax bill.
Federal income tax: The additional income from RMDs can push you into a higher marginal tax bracket. For 2026, the IRS tax brackets for ordinary income range from 10% to 37%. A retiree with significant account balances might find their RMDs placing them solidly in the 22% or 24% bracket.
Medicare IRMAA surcharges: If your modified adjusted gross income (MAGI) exceeds $106,000 for an individual or $212,000 for a married couple filing jointly (2026 thresholds), you’ll pay higher Medicare Part B and Part D premiums through the Income-Related Monthly Adjustment Amount (IRMAA). Large RMDs can push you over these thresholds unexpectedly.
Social Security taxation: Up to 85% of your Social Security benefits become taxable once your combined income exceeds $34,000 (single) or $44,000 (married filing jointly). RMD income counts toward this threshold.
State taxes: Many states tax RMD income as ordinary income, though some states — including Florida, Texas, and Nevada — have no state income tax, which can be a meaningful factor in retirement location planning.
RMD penalty: If you fail to take the full RMD by the deadline, the IRS imposes an excise tax of 25% on the amount not withdrawn. SECURE 2.0 reduced this from 50%, and it drops further to 10% if you correct the mistake within two years. Still, this is a significant and entirely avoidable cost.
Common RMD Mistakes That Cost Retirees Thousands
Even financially savvy retirees make costly errors with RMDs. Here are the most common ones — and how to avoid them.
Mistake 1: Missing the deadline or taking too little. The IRS is unforgiving here. Taking even $1 less than your required amount triggers the excise tax on the shortfall. Set a calendar reminder for November 1 each year as a checkpoint, leaving enough time to ensure the withdrawal processes before December 31.
Mistake 2: Assuming your brokerage will handle it automatically. Some custodians offer automatic RMD services, but enrollment is not always automatic or complete. Never assume a distribution happened — verify every year with a statement or account confirmation.
Mistake 3: Ignoring inherited IRA rules. Non-spouse beneficiaries who inherited IRAs after January 1, 2020 generally must empty the account within 10 years under the SECURE Act. Eligible designated beneficiaries (spouses, minor children, disabled individuals, and those not more than 10 years younger than the deceased) have different, more favorable rules. Getting this wrong can be extremely costly.
Mistake 4: Double-counting for 401(k)s. Unlike IRAs — where you can aggregate and withdraw from any IRA — 401(k) RMDs must be taken separately from each 401(k) plan. You cannot satisfy a 401(k) RMD by withdrawing from your IRA.
Mistake 5: Failing to account for the tax impact before year-end. Many retirees realize in December that their RMD, combined with other income, will push them into a higher bracket or trigger IRMAA. Planning earlier in the year — ideally by October — gives you time to consider offsetting strategies like charitable contributions or Roth conversions.
Smart Strategies to Manage Your RMD Tax Bill
While you can’t avoid RMDs from traditional accounts, you can manage their tax impact with the right strategies. Here are the most effective approaches available to most retirees.
Qualified Charitable Distributions (QCDs): If you’re age 70½ or older, you can donate up to $105,000 per year (2026 IRS limit, indexed for inflation) directly from your IRA to a qualified charity. This counts toward your RMD but is excluded from your taxable income. A QCD is one of the most powerful tax tools available to retirees with charitable intent.
Roth conversions before RMDs begin: Converting traditional IRA or 401(k) funds to a Roth IRA in the years before RMDs start can reduce the size of your future RMDs. You pay income tax now, but reduce the balance subject to future mandatory withdrawals — and Roth funds grow tax-free. This is particularly effective during lower-income years early in retirement. See our full breakdown in 401(k) Withdrawal Rules: Avoid Penalties & Taxes for context on withdrawal sequencing.
Reinvesting RMD proceeds: If you don’t need the RMD for living expenses, you can reinvest it in a taxable brokerage account. While you’ll pay taxes on the distribution, the funds can continue to grow. Investing in tax-efficient vehicles like ETFs within a taxable account can help preserve growth.
Taking RMDs early in January: Withdrawing early in the calendar year keeps your deadline risk near zero and gives your cash more time to be deployed or invested outside the retirement account.
Alternatives to Reduce Future RMD Exposure
If you’re still in the accumulation phase or in early retirement, here are three strategies that can reduce or reshape your RMD burden over time.
Roth IRA contributions and conversions: Roth IRAs have no RMDs for the original owner. Building Roth assets now — through direct contributions if income-eligible, or through systematic conversions — reduces your future taxable RMD exposure significantly. The trade-off is paying taxes today rather than later.
Annuities with a Qualifying Longevity Annuity Contract (QLAC): Under IRS rules, you can use up to $200,000 of your IRA or 401(k) balance (2026 limit) to purchase a QLAC — a type of deferred income annuity. That amount is excluded from RMD calculations until payouts begin, which can be delayed until as late as age 85. QLACs provide longevity protection and temporarily reduce RMDs, but they come with liquidity trade-offs.
Spending down traditional accounts before RMDs begin: If you retire early or have a low-income period between retirement and your RMD starting age, this is a strategic window to withdraw from traditional accounts voluntarily — at a lower tax rate — before RMDs kick in and potentially push you into higher brackets involuntarily.
Frequently Asked Questions About RMDs
Q: Can I reinvest my RMD back into my IRA?
No. Once you’ve taken a Required Minimum Distribution, you cannot roll it back into an IRA or 401(k). However, you can reinvest the after-tax amount in a taxable brokerage account.
Q: What happens if I take more than my RMD in a given year?
You can always withdraw more than the required minimum. The excess doesn’t reduce or eliminate future RMDs — those are recalculated each year based on the December 31 account balance. The extra withdrawal is simply taxed as ordinary income.
Q: Do inherited Roth IRAs have RMDs?
Yes. While the original Roth IRA owner is not subject to RMDs during their lifetime, non-spouse beneficiaries who inherit a Roth IRA after 2019 must generally empty the account within 10 years under the SECURE Act’s 10-year rule — though distributions are still tax-free.
Q: Are RMDs required from Roth 401(k) accounts?
No — starting in 2024, the SECURE 2.0 Act eliminated RMDs from Roth 401(k) accounts, aligning them with Roth IRA rules. This was a significant change for those who wanted to keep Roth 401(k) funds growing without mandatory distributions.
Q: Can my spouse take a smaller RMD if they are much younger than me?
If your only beneficiary is a spouse who is more than 10 years younger than you, the IRS allows you to use the Joint Life and Last Survivor Expectancy Table instead of the Uniform Lifetime Table. This table produces a larger divisor, resulting in a smaller RMD — a meaningful advantage for couples with a significant age gap.
Final Takeaways: RMDs Don’t Have to Be a Surprise
Required Minimum Distributions are an inevitable part of owning tax-deferred retirement accounts, but they don’t have to catch you off guard. The key is knowing when they start, how to calculate them accurately, and — most importantly — how to plan around their tax implications years in advance.
Start by identifying which of your accounts are subject to RMDs. Then model out what those distributions might look like using your current balances and projected growth rates. If you’re still a decade away from your RMD starting age, you may have a valuable window to convert some traditional assets to Roth, reducing your future mandatory withdrawal burden.
If you’re already taking RMDs, consider whether a Qualified Charitable Distribution, a QLAC, or more strategic timing could lower your effective tax rate. Every dollar saved in unnecessary taxes is a dollar that stays in your retirement.
As always, this is a complex area where a small planning error can cost thousands. Working with a licensed financial advisor or CPA who specializes in retirement income is strongly recommended before making any major decisions.
Financial Disclaimer: This article is for educational purposes only and does not constitute financial, tax, or investment advice. Always consult a licensed financial advisor, CPA, or attorney before making financial decisions.