Required Minimum Distributions: Everything You Must Know Before Age 73

If you have money in a traditional IRA, 401(k), 403(b), or most other tax-deferred retirement accounts, the IRS has a mandatory withdrawal schedule waiting for you. It is called the Required Minimum Distribution — and starting at age 73, you must take a specific amount out of your accounts each year, whether you need the money or not.

Miss a distribution, and the penalty is severe: 25% of the amount you should have withdrawn (reduced to 10% if corrected promptly). Get the calculation wrong, and you face the same penalty on the shortfall.

Understanding RMDs is not optional for anyone with a significant tax-deferred retirement account. Here is everything you need to know.

Required Minimum Distributions are the IRS's mechanism for collecting the taxes it has been deferring on your traditional retirement account contributions and growth for decades.

When you contributed to a traditional IRA or 401(k), you received a tax deduction. The money grew tax-deferred. The IRS agreed to wait — but only so long. RMDs are how the government ensures it eventually collects those deferred taxes.

The logic is straightforward: tax-deferred accounts were designed to fund retirement, not to accumulate wealth indefinitely and pass it to heirs tax-free. RMDs prevent that.

The SECURE 2.0 Act, passed in December 2022, changed the RMD starting age:

• Born before 1951: RMDs began at age 70½ (under old rules)
• 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. All subsequent RMDs must be taken by December 31 of each year.

Important: If you delay your first RMD until April 1, you will take two RMDs in that calendar year — the first (for the prior year) and the second (for the current year). This can push you into a higher tax bracket. Many retirees choose to take their first RMD in the year they turn 73 to avoid this double-distribution year.

Subject to RMDs:

• Traditional IRAs
• SEP IRAs
• SIMPLE IRAs
• 401(k) plans
• 403(b) plans
• 457(b) plans
• Most other employer-sponsored retirement plans

Not subject to RMDs (during your lifetime):

• Roth IRAs (Roth 401(k)s are now also exempt from RMDs under SECURE 2.0)
• Non-qualified annuities (funded with after-tax dollars)
• Regular taxable brokerage accounts

This distinction is one of the primary reasons Roth conversions are so valuable — moving money from a traditional IRA to a Roth IRA eliminates the future RMD obligation on that money.

Your RMD for each year is calculated by dividing your account balance (as of December 31 of the prior year) by a life expectancy factor from IRS tables.

The most commonly used table is the Uniform Lifetime Table, which applies to most account owners. The life expectancy factor decreases each year, which means the required withdrawal percentage increases as you age.

Example:

• Account balance on December 31, 2025: $600,000
• Age in 2026: 75
• Life expectancy factor (from IRS Uniform Lifetime Table): 24.6
• RMD for 2026: $600,000 ÷ 24.6 = $24,390

As you age, the factor decreases. At age 80, the factor is 20.2. At age 85, it is 16.0. At age 90, it is 12.2. The older you get, the larger the required withdrawal as a percentage of your account.

If you have multiple traditional IRAs, you calculate the RMD for each account separately — but you can take the total from any one or combination of your IRAs. For 401(k)s and other employer plans, each account must satisfy its own RMD separately.

Every dollar of your RMD is taxed as ordinary income in the year you receive it. For retirees with large traditional accounts, this can create a substantial and sometimes unexpected tax burden.

The compounding effect is particularly problematic: if you do not need the RMD income to live on, you are forced to take a taxable distribution anyway — and then reinvest the after-tax proceeds in a taxable account where future growth will also be taxed.

RMDs can also trigger secondary tax consequences:

Social Security taxation: Up to 85% of Social Security benefits become taxable once your combined income (including RMDs) exceeds $44,000 for married couples. Large RMDs can push you over this threshold.

Medicare IRMAA surcharges: Medicare Part B and Part D premiums are income-based. RMDs that push your income above certain thresholds can increase your Medicare premiums by hundreds of dollars per month.

Net Investment Income Tax: If your income exceeds $250,000 (married filing jointly), an additional 3.8% tax applies to net investment income.

The most effective strategies for managing RMDs involve reducing the size of your traditional IRA before RMDs begin.

Roth conversions: Converting traditional IRA assets to a Roth IRA during the years before RMDs begin reduces the balance subject to future RMDs. Every dollar converted is a dollar that will never generate a mandatory taxable distribution.

Qualified Charitable Distributions (QCDs): If you are 70½ or older and charitably inclined, you can make a Qualified Charitable Distribution directly from your IRA to a qualified charity. QCDs count toward your RMD but are excluded from your taxable income — up to $105,000 per year (indexed for inflation). This is one of the most tax-efficient ways to give to charity in retirement.

Delay retirement account withdrawals before RMDs: Some retirees live on taxable account withdrawals in their early retirement years, allowing their traditional IRA to continue growing. This can backfire if the IRA grows so large that future RMDs become overwhelming. A more balanced approach — taking some traditional IRA withdrawals before RMDs begin, or executing Roth conversions — is often better.

Non-qualified annuities: Moving money from a traditional IRA into a non-qualified annuity does not eliminate the RMD on the IRA — but it can provide a tax-efficient vehicle for reinvesting after-tax RMD proceeds. Non-qualified annuities grow tax-deferred and are not subject to RMDs during your lifetime.

Under the SECURE Act (2019) and SECURE 2.0 (2022), most non-spouse beneficiaries who inherit a traditional IRA must withdraw the entire balance within 10 years of the original owner's death. This "10-year rule" replaced the old "stretch IRA" strategy that allowed beneficiaries to spread distributions over their own lifetime.

The 10-year rule means your heirs may be forced to take large taxable distributions during their peak earning years — potentially at their highest tax rates. This is another reason why Roth conversions during your lifetime can be a powerful legacy planning tool: Roth IRAs inherited by beneficiaries are also subject to the 10-year rule, but the distributions are tax-free.

RMDs are not optional, and the penalties for getting them wrong are steep. But with the right planning — ideally starting 5 to 10 years before RMDs begin — you can significantly reduce the tax impact and keep more of your retirement savings working for you.

The key actions to take now:

1. Calculate your projected RMDs at age 73, 75, 80, and beyond based on your current account balance and expected growth rate.
2. Evaluate whether Roth conversions make sense in your current tax bracket.
3. Consider Qualified Charitable Distributions if you are already 70½ and charitably inclined.
4. Review how RMDs will interact with Social Security, Medicare premiums, and other income sources.

This analysis is part of every retirement income plan we build for clients. If you would like to understand exactly what your RMD picture looks like — and what you can do about it — we would be glad to walk through it with you.