1. What Is an RMD?
Required Minimum Distributions are minimum amounts you must withdraw annually from traditional IRAs, 401(k)s, 403(b)s, and other qualified retirement plans. The SECURE Act 2.0 raised the RMD beginning age to 73 for those reaching 72 after December 31, 2022, and will raise it to 75 for those reaching 73 after 2032.
2. When Must You Start?
Your first RMD is due by April 1 of the year after you turn 73. Subsequent RMDs are due by December 31 each year. Note that taking your first RMD by April 1 results in two distributions in that year—the first by April 1 and the second by December 31—which may increase your tax liability.
3. Calculating Your RMD
RMDs are calculated using IRS life expectancy tables. Divide your prior year-end account balance by the distribution period from the Uniform Lifetime Table. Use the IRS RMD worksheets or IRA custodian calculators. Each IRA requires its own calculation, but you may aggregate RMDs and withdraw from any one IRA.
4. 401(k) and Workplace Plans
RMDs from 401(k)s, 403(b)s, and other workplace plans are calculated separately and cannot be aggregated with IRA RMDs. Each plan requires its own distribution. If you are still working at age 73 and do not own more than 5% of the company, you may delay RMDs from that plan until retirement.
5. Roth Exceptions
Roth IRAs have no RMD requirements during the original owner's lifetime. However, Roth 401(k)s and Roth 403(b)s do require RMDs. Inherited Roth IRAs are subject to RMD rules under the 10-year rule for most beneficiaries.
6. Penalty for Missing RMDs
Failure to take the full RMD results in an excise tax of 25% of the shortfall (reduced from 50% by the SECURE Act 2.0). The IRS may waive this penalty if reasonable cause is shown and the shortfall is corrected promptly.