Required Minimum Distributions (RMDs): What Every Retiree Needs to Know
If you're approaching 73 or already there, you've probably heard the term RMD, Required Minimum Distribution. It's one of those retirement milestones that sneaks up on people, and if you're not prepared, it can create unexpected tax bills and financial headaches.
Here's the thing: you spent decades saving in your 401(k) or IRA, getting tax deductions along the way. The IRS lets you defer those taxes for years. But eventually, they want their cut. That's what RMDs are all about.
Whether you're a few years away from your first RMD or you've been taking them for a while, understanding the rules—and having a strategy—can save you thousands in taxes and help you make smarter decisions about your retirement income.
Let's walk through what you need to know.
What Are RMDs (And Why Do They Exist)?
A Required Minimum Distribution is exactly what it sounds like: the IRS requires you to withdraw a minimum amount from your retirement accounts each year once you reach a certain age.
Which accounts have RMDs?
- Traditional IRAs
- 401(k)s
- 403(b)s
- 457 plans
- SEP IRAs
- SIMPLE IRAs
Which accounts DON'T have RMDs?
- Roth IRAs (while you're alive - your heirs will have RMDs)
- Roth 401(k)s (starting in 2024, thanks to the SECURE 2.0 Act)
Why do RMDs exist?
The government gave you a tax break when you contributed to these accounts. You didn't pay taxes on that money upfront, and it's been growing tax-deferred for decades. RMDs ensure that eventually, you pay taxes on it.
Think of it this way: the IRS has been patient. Now they want their share.
When Do RMDs Start? Key Ages and Deadlines
This is where things have changed recently, so let's make sure you're working with the right information.
The Age You Must Start RMDs
For many years, RMDs started at age 70½. Then the SECURE Act changed it to 72. And now, thanks to SECURE 2.0 (passed in 2022), it's changed again.
Here's the current rule:
- If you were born in 1950 or earlier, your RMDs started at age 72
- If you were born 1951-1959, your RMDs start at age 73
- If you were born 1960 or later, your RMDs start at age 75
Important Deadlines
Your first RMD: You have until April 1 of the year after you turn 73 to take your first RMD.
For example, if you turn 73 in 2026, you have until April 1, 2027 to take your first RMD.
Every RMD after that: Must be taken by December 31 each year.
Here's the catch: If you delay your first RMD until April of the following year, you'll have to take two distributions in that same year - the one you delayed and the current year's RMD. That could push you into a higher tax bracket and cost you more in taxes.
Most advisors recommend taking your first RMD in the year you turn 73 to avoid doubling up.
How Much Do You Have to Withdraw?
The amount you're required to withdraw depends on your account balance and your age. The IRS uses life expectancy tables to calculate it.
The formula:
Take your account balance as of December 31 of the previous year, and divide it by your life expectancy factor (from the IRS Uniform Lifetime Table).
Example:
Let's say you're 73 and your IRA balance was $500,000 on December 31 last year. The life expectancy factor for age 73 is 26.5.
$500,000 ÷ 26.5 = $18,868
That's your RMD for the year.
Each year, as you get older, the life expectancy factor gets smaller, which means your RMD percentage gets larger. At 73, you're withdrawing about 3.8% of your account. By 85, you're withdrawing over 6%.
Good news: Your financial advisor or IRA custodian will calculate this for you. You don't have to do the math yourself. But it's helpful to understand how it works.
What Happens If You Miss Your RMD?
This is where the IRS gets serious. If you don't take your full RMD by the deadline, you face a penalty.
Old penalty (before 2023): 50% of the amount you should have withdrawn but didn't.
New penalty (SECURE 2.0): 25% of the shortfall. And if you correct it quickly, it can be reduced to 10%.
Example:
Your RMD was $20,000, but you only took $15,000. You're short $5,000.
Under the new rules, you'd owe a penalty of $1,250 (25% of $5,000). If you catch it and fix it promptly, the penalty could be reduced to $500 (10%).
Still painful, but better than the old 50% penalty.
Bottom line: Don't miss your RMD. Set reminders. Work with your advisor. Make it automatic if possible. (could be a good spot to highlight how RetireRight supports its clients on this front)
Did You Know: At RetireRight, we work to set up automatic RMD payments for clients that do not implement a month by month retirement paycheck policy.
Recent Changes: What the Big Beautiful Bill Did (And Didn't Do) for RMDs
You might have heard about the One Big Beautiful Bill Act that passed in 2025. It made a lot of tax changes, but here's what it did and didn't do for RMDs:
What it did:
- Made the current tax rates (10%, 12%, 22%, 24%, 32%, 35%, 37%) permanent. That means the tax rates you're paying on your RMDs aren't going to suddenly jump in a few years.
- Increased the standard deduction temporarily (2025-2028), which helps offset some taxable income, including RMDs.
- Created a senior deduction for people 65+ (an extra $6,000 per person), which can help reduce the tax bite on your RMDs if you qualify.
What it didn't do:
- It didn't change the RMD age (that was already set by SECURE 2.0)
- It didn't eliminate RMDs or change the calculation
- It didn't increase the penalty for missing RMDs (that was also SECURE 2.0)
What this means for you:
The tax environment is more stable now. If you're planning Roth conversions or other strategies to manage RMDs, you can do so knowing the tax rates won't change unexpectedly.
And if you're 65+, that extra $6,000 deduction (or $12,000 for couples) can help offset some of your RMD income, assuming you're under the income phase-out thresholds.
Why You Need an RMD Strategy (Not Just Compliance)
Most people treat RMDs like a chore. The IRS says you have to take money out, so you do the minimum required and move on.
But here's the thing: RMDs are more than a tax obligation. They're a retirement income planning opportunity.
If you don't have a strategy, you're probably paying more in taxes than you need to, and you might be missing opportunities to make your money work better for you.
Key Questions Your RMD Strategy Should Answer:
1. Which accounts should I withdraw from first?
If you have multiple IRAs or 401(k)s, you need to calculate the total RMD across all accounts, but you can take the full amount from one account if you want. That gives you some flexibility.
2. Should I be doing Roth conversions before RMDs start?
If you're 65-72 and not taking RMDs yet, this might be the perfect time to convert some traditional IRA money to a Roth. You'll pay taxes now, but you'll reduce your future RMDs and avoid taxes on that money forever.
3. How do I minimize the tax impact of RMDs?
RMDs are taxable income. They can push you into a higher tax bracket, increase your Medicare premiums (IRMAA), and make more of your Social Security taxable. A good strategy minimizes these impacts.
4. Do I actually need the RMD money?
If you don't need the money for living expenses, what's your plan? Reinvest it? Give it to charity? Gift it to family? Each option has different tax implications.
Frequently Asked Questions About RMDs
1. Do I have to take an RMD from every retirement account I own?
You have to calculate the RMD for each account, but you have some flexibility on where you take it from.
- IRAs: You can total up the RMDs from all your traditional IRAs and take the full amount from one IRA if you want.
- 401(k)s: You must take the RMD from each 401(k) separately.
Pro tip: If you have multiple IRAs, this gives you flexibility. You might take the RMD from the account with the investments you're least excited about, leaving your best-performing accounts to keep growing.
2. What if I'm still working at 73? Do I still have to take RMDs?
It depends.
- IRAs: Yes, you must take RMDs from your traditional IRAs, even if you're still working.
- 401(k) at your current employer: If you're still working and you don't own 5% or more of the company, you can delay RMDs from that 401(k) until you retire.
This is called the "still working exception," and it only applies to your current employer's 401(k), not old 401(k)s from previous jobs.
3. Can I take more than my RMD?
Yes. The RMD is the minimum. You can always take out more if you need it.
But taking more doesn't give you credit toward next year's RMD. Each year stands alone.
4. What happens if I have multiple beneficiaries on my IRA?
Your RMD is based on your life expectancy, not your beneficiaries'. So having multiple beneficiaries doesn't change your RMD calculation.
However, it does matter for your beneficiaries after you pass away. Under the SECURE Act, most non-spouse beneficiaries must empty the inherited IRA within 10 years, which can create big tax bills for them.
Planning opportunity: If you're concerned about your heirs' tax situation, consider Roth conversions now to reduce what they'll inherit in taxable accounts.
5. Do RMDs affect my Social Security or Medicare?
Yes, indirectly.
RMDs count as taxable income, which means:
- More of your Social Security becomes taxable. Up to 85% of your Social Security benefits can be taxed if your income (including RMDs) exceeds certain thresholds.
- Your Medicare premiums can increase. If your income is high enough, you'll pay IRMAA (Income-Related Monthly Adjustment Amounts), which means higher Part B and Part D premiums.
This is why RMD planning matters. Strategies like Roth conversions, QCDs, and tax-efficient withdrawal sequencing can help manage these impacts.
6. What's a Qualified Charitable Distribution (QCD), and should I use one?
A QCD lets you donate up to $105,000 directly from your IRA to a qualified charity if you're 70½ or older.
Why it's powerful:
- The donation counts toward your RMD
- You don't pay taxes on the amount donated
- You don't have to itemize to get the benefit
- It doesn't increase your adjusted gross income, so it won't trigger IRMAA or make more of your Social Security taxable
Who should use it:
If you're charitably inclined and taking RMDs, this is one of the best strategies available. You satisfy your RMD, support causes you care about and reduce your tax bill—all at the same time.
The Biggest RMD Mistakes People Make
1. Waiting until December to take their RMD
Life happens. If you wait until the last minute, you might forget, get busy, or run into processing delays. Take your RMD early in the year or set it up to be automatic.
2. Not coordinating RMDs with their overall tax strategy
Your RMD isn't isolated. It affects your entire tax picture. Work with your financial advisor to make sure your RMDs fit into a comprehensive plan.
3. Taking RMDs from the wrong accounts
If you have flexibility (like with multiple IRAs), be strategic. Don't just take it from wherever is easiest. Think about which account you want to preserve and which one you want to draw down.
4. Ignoring QCDs if they're charitably inclined
If you give to charity anyway and you're over 70½, a QCD is one of the best RMD strategies available. It's covered in detail in the FAQ above, but the short version: you satisfy your RMD, support causes you care about, and pay zero taxes on the donation. If this applies to you, don't miss it.
5. Not planning for RMDs
The best time to plan for RMDs is before they start. If you're in your 60s or early 70s, you have opportunities to do Roth conversions, reposition assets, and set up a tax-efficient withdrawal strategy. Once RMDs start, you lose some flexibility.
How a Financial Advisor Can Help
RMDs aren't complicated in theory, but in practice, they intersect with a lot of other financial planning decisions:
- Tax planning
- Medicare planning (IRMAA)
- Social Security timing
- Estate planning
- Charitable giving
- Investment strategy
A good financial advisor helps you see the big picture and build a strategy that minimizes taxes, maximizes flexibility, and aligns with your goals.
At RetireRight, we work with retirees across the Midwest and beyond to create comprehensive RMD strategies that go beyond just checking the box. We help you:
- Calculate your RMDs accurately
- Minimize the tax impact
- Coordinate with Social Security and Medicare planning
- Implement QCDs if appropriate
- Plan Roth conversions before RMDs start
- Avoid costly mistakes
If you're approaching 73 or already taking RMDs, let's make sure you have a strategy—not just compliance.
Ready to talk about your RMD strategy? Schedule a conversation with RetireRight today.
Disclaimer: This information is for educational purposes only and should not be considered tax or legal advice. RMD rules are complex and subject to change. Please consult with a qualified tax professional or CPA before making any decisions about your required minimum distributions. RetireRight does not provide tax preparation services but works collaboratively with your tax professional to support your overall financial strategy.