Required Minimum Distributions (RMD): How to Calculate, When They Start, and 5 Tax Strategies

Why RMDs Matter - and the Penalty for Getting Them Wrong

If you have money in a traditional 401(k), traditional IRA, or similar tax-deferred retirement account, the IRS doesn't let you defer taxes forever. Starting at a certain age, you must begin taking Required Minimum Distributions (RMDs) - and the penalty for missing one is steep: a 25% excise tax on the amount you should have withdrawn. Use our RMD Calculator to find your exact distribution amount before the deadline hits.

What Are Required Minimum Distributions?

RMDs are the minimum amounts you must withdraw annually from most tax-deferred retirement accounts. The IRS requires these distributions to ensure you eventually pay income tax on money that grew tax-free for decades.

Accounts subject to RMDs:

• Traditional IRAs
• Traditional 401(k) and 403(b) plans
• SEP IRAs and SIMPLE IRAs
• 457(b) plans

Not subject to RMDs: Roth IRAs (during the owner's lifetime). This is one of the biggest advantages of Roth conversions - Roth accounts grow tax-free and have no forced withdrawals.

When Do RMDs Start? SECURE 2.0 Age Rules

The SECURE 2.0 Act changed RMD starting ages:

First-year grace period: You can delay your first RMD until April 1 of the year after you turn the threshold age. But beware - this means you'll take two RMDs in that second year (the delayed one plus the current year's), which could push you into a higher tax bracket.

If you're still working and don't own 5% or more of the company, you can delay 401(k) RMDs from your current employer's plan until you actually retire.

How to Calculate Your RMD: Step-by-Step

The formula is straightforward:

RMD = Account Balance (Dec. 31 of prior year) ÷ Life Expectancy Factor

The life expectancy factor comes from the IRS Uniform Lifetime Table (Table III). Here's a snapshot:

Worked Example

Sarah is 75 years old. Her traditional IRA balance on December 31, 2025, was $500,000.

1. Look up the distribution period for age 75: 24.6
2. Divide: $500,000 ÷ 24.6 = $20,325
3. Sarah must withdraw at least $20,325 during 2026

She can always withdraw more - the RMD is a floor, not a ceiling. To run your own numbers instantly, try our RMD Calculator.

Multiple accounts? If you have several traditional IRAs, you calculate the RMD for each account separately but can take the total from any one (or combination) of your IRAs. This doesn't apply to 401(k)s - each 401(k) RMD must be taken from that specific plan.

5 Strategies to Minimize RMD Taxes

RMDs are taxed as ordinary income, which can significantly increase your tax bill. Here are strategies to soften the blow:

1. Roth Conversions Before RMDs Start

Convert traditional IRA funds to a Roth IRA in the years before RMDs begin. You'll pay tax on the conversion, but the money grows tax-free afterward - and Roth IRAs have no RMDs during your lifetime.

2. Qualified Charitable Distributions (QCDs)

If you're 701⁄2 or older, you can donate up to $105,000 (2026 limit) directly from your IRA to a qualified charity. QCDs count toward your RMD but are excluded from taxable income - one of the most powerful tax-reduction tools available.

3. Strategic Withdrawal Timing

Plan your annual withdrawals to stay within a favorable tax bracket. Our Retirement Withdrawal Calculator can help you model different withdrawal scenarios across your accounts.

4. Delay the First RMD (Carefully)

Using the April 1 grace period gives you extra time, but doubling up in year two could push you into a higher bracket. Run the numbers both ways before deciding.

5. Coordinate with Social Security

If you haven't claimed Social Security yet, timing your claim alongside RMDs can help manage your combined taxable income. Our Social Security Benefits Guide covers claiming strategies in detail.

RMD Mistakes and Penalties

Missing or shortchanging your RMD triggers a 25% excise tax on the shortfall (reduced from the old 50% penalty by SECURE 2.0). The penalty drops to 10% if you correct the error within two years.

Common mistakes:

• Forgetting to take an RMD from each 401(k) separately
• Using the wrong year-end balance
• Missing the December 31 deadline (or April 1 for the first year)
• Inheriting an IRA and not understanding the 10-year distribution rule

Planning ahead is the best defense. Your 401(k) contribution strategy and withdrawal plan should both account for RMD obligations well before they begin.

Frequently Asked Questions

What age do RMDs start under SECURE 2.0?

If you were born between 1951 and 1959, RMDs begin at age 73. If you were born in 1960 or later, RMDs start at age 75 (effective 2033). The SECURE 2.0 Act pushed back the starting age from the previous 72 to give Americans more time for tax-deferred growth.

How is the RMD amount calculated?

Divide your account balance (as of December 31 of the prior year) by the IRS Uniform Lifetime Table factor for your current age. For example, a 75-year-old with a $500,000 balance divides by 24.6 to get a $20,325 RMD. Use our RMD Calculator to get your exact number.

What happens if you miss an RMD deadline?

The IRS imposes a 25% excise tax on any RMD amount you failed to withdraw by the deadline. Under SECURE 2.0, this penalty drops to 10% if you correct the shortfall within two years by taking the missed distribution and filing an amended return.

Do Roth IRAs require RMDs?

No - Roth IRAs are not subject to RMDs during the original owner's lifetime. This is a key reason many retirees pursue Roth conversions before RMDs begin. However, inherited Roth IRAs are subject to the 10-year distribution rule for most non-spouse beneficiaries.

Can you reduce your RMD tax bill?

Yes. The most effective strategies include Roth conversions before RMD age, Qualified Charitable Distributions (QCDs) to donate directly from your IRA, strategic timing of withdrawals across accounts, and coordinating with Social Security claiming age to manage total taxable income.

Use the RMD Calculator to calculate your Required Minimum Distribution in under 60 seconds. For a complete retirement income strategy, explore all our Retirement Planning Calculators.