Required minimum distributions—usually called RMDs—are annual withdrawals the government requires from many tax-deferred retirement accounts once you reach a certain age. The point is simple: these accounts gave you years (sometimes decades) of tax deferral, and eventually you must begin taking withdrawals so the income can be taxed.
This guide explains how RMDs work, when they begin, which accounts are affected, how they’re calculated, and the practical steps that help people avoid penalties.
What Is an RMD?
An RMD is the minimum amount you must withdraw from certain retirement accounts each year after you reach “RMD age.” The exact dollar amount changes year to year based on:
- Your account balance (typically as of December 31 of the prior year), and
- A life expectancy factor from IRS tables.
You can always withdraw more than the RMD—RMD is just the minimum.
Which Accounts Usually Require RMDs?
RMDs generally apply to many tax-deferred accounts such as:
- Traditional IRAs (including SEP and SIMPLE IRAs)
- Many employer plans like 401(k)s and 403(b)s (and similar plans)
Accounts that typically don’t have lifetime RMDs for the original owner
- Roth IRAs (no RMDs while the original owner is alive)
- Designated Roth accounts in employer plans (like Roth 401(k)/403(b))—RMDs are not required during the owner’s lifetime (rules differ for beneficiaries)
When Do RMDs Start?
Your “RMD age”
- For many people today, RMDs generally begin at age 73.
- Rules also include a later start age for some younger cohorts (commonly described as age 75 for people born in 1960 or later, with the shift occurring in the future).
Your first RMD deadline (the “required beginning date”)
Most years, your RMD must be taken by December 31.
But for your first RMD, you typically have a choice:
- Take it by December 31 of the year you reach RMD age, or
- Delay it until April 1 of the following year
Important trade-off: If you delay the first RMD until April 1, you’ll generally have to take two RMDs in that next year (the delayed first one and the second-year RMD by December 31). That can increase taxable income in that year.
The “Still Working” Exception (Employer Plans)
Some employer plans allow you to delay RMDs from that employer plan account if you’re still working (and meet the plan’s rules). This exception generally applies to workplace plans—not to IRAs.
How RMDs Are Calculated (The Simple Version)
A common calculation method is:
RMD = (Prior year-end account balance) ÷ (Life expectancy factor)
The life expectancy factor comes from IRS tables.
If you have multiple accounts, you may need to calculate an RMD for each account type separately (especially across different employer plans).
How RMDs Are Taxed
For traditional tax-deferred accounts, RMD withdrawals are generally included in taxable income (with special handling for any after-tax “basis,” if applicable).
For designated Roth accounts, “qualified” Roth distributions can be tax-free, but the key RMD point is that lifetime RMDs aren’t required for the owner.
What Happens If You Miss an RMD?
If you don’t withdraw the full RMD by the deadline, the shortfall may be subject to an excise tax:
- 25% of the amount not taken
- Potentially reduced to 10% if corrected within two years
The IRS generally expects this to be handled via Form 5329 with your tax return.
Practical Ways to Make RMDs Easier
These habits reduce errors and stress:
- Know your deadline (December 31 most years; special first-year rule).
- Automate withdrawals (monthly/quarterly installments can still satisfy the annual requirement).
- Consider tax withholding if the distribution will increase your tax bill (withholding is optional but can help budgeting).
- Consolidate accounts where appropriate so there are fewer moving parts to track (especially common with older employer plans).
- Review annually in the fall—leaving it to late December increases the chance of a missed step.
Bottom Line
RMDs are a normal part of retirement planning: once you reach the required age, you must withdraw at least a minimum amount from many tax-deferred retirement accounts each year. The biggest “gotchas” are the first-year deadline choice (and the possible “two RMDs in one year” result) and the penalty for missing a required withdrawal.
Educational information only. This content is not individualized financial, tax, or legal advice and does not create an advisor-client relationship.