Required Minimum Distributions (RMDs) Explained
Understanding the New RMD Age Rules
The SECURE 2.0 Act, passed in late 2022, fundamentally altered the timeline for when retirees must begin taking Required Minimum Distributions (RMDs) from their traditional retirement accounts. For individuals who reached age 72 after December 31, 2022, the starting age for RMDs has been raised from 72 to 73. This change applies to the tax year 2023 and beyond.
The landscape shifts once more in the next decade: under SECURE 2.0, the RMD starting age rises to 75 for individuals born in 1960 or later — that is, for those reaching their early 70s from 2033 onward. There is no intermediate age-74 step and no age-76 tier; the schedule is simply 73 today, and 75 for the 1960-and-later birth cohort.
This gradual increase provides a longer window for tax-deferred growth, allowing savers to delay taxable income. However, because the starting age is now higher, the annual RMD amounts may be larger than they would have been under the previous rules, as the divisor in the calculation formula is smaller. Savers should verify their specific birth date against IRS Publication 590-B to determine their exact starting year.
Calculating Your RMD: A Worked Example
The IRS provides three specific tables to calculate the distribution amount. The most commonly used is the Uniform Lifetime Table, which assumes the account owner is married to a single-year younger spouse who is the primary beneficiary.
The calculation is straightforward:
1. Identify the account balance as of December 31 of the previous year.
2. Locate the corresponding life expectancy factor from the Uniform Lifetime Table based on your age.
3. Divide the account balance by the life expectancy factor.
Consider a typical worker with a $500,000 balance in a traditional 401(k) or IRA at age 73. According to the Uniform Lifetime Table, the life expectancy factor for age 73 is 26.5.
RMD = $500,000 ÷ 26.5 ≈ $18,868
In this scenario, the worker would need to withdraw approximately $18,868 by April 1 of the following year (the “Required Beginning Date”). If the worker delays the first RMD until April 1 of the year after they turn 73, they must take two distributions that year: the first for the current year and the second for the prior year. This can create a significant tax bracket spike, so many financial planners recommend taking the first RMD by December 31 of the year you turn 73 to avoid this “double distribution” scenario.
Consequences of Missing an RMD
The IRS enforces RMD rules strictly. If you fail to withdraw the full calculated amount, you are subject to an excise tax. The penalty is 25% of the amount that should have been withdrawn but was not.
For example, if the calculated RMD was $18,868 and you withdrew nothing, the shortfall is $18,868. The initial penalty would be $4,717 (25% of $18,868). However, there is a relief provision. If you correct the error by withdrawing the shortfall promptly and file Form 5329 with the IRS, the penalty can be reduced to 10%. This reduction is not automatic; you must demonstrate that the failure was due to reasonable error or ignorance and that the funds were distributed as soon as discovered.
Given the severity of the penalty, many savers opt to have their plan administrators automatically calculate and withhold the RMD. This reduces the administrative burden and minimizes the risk of missing the deadline.
Roth 401(k) RMD Exemption
A significant change introduced by the SECURE 2.0 Act, effective for plan years beginning after December 31, 2023, is the elimination of lifetime RMDs for Roth 401(k) accounts. Previously, Roth 401(k) balances were subject to RMDs during the account owner’s lifetime, mirroring the rules for traditional 401(k)s.
Under the new rules, Roth 401(k) accounts are no longer required to take distributions while the original owner is alive. This aligns Roth 401(k)s more closely with Roth IRAs, which have never required lifetime RMDs. This change enhances the tax-free growth potential of Roth 401(k) balances, as the funds can remain in the account indefinitely, continuing to grow tax-free and being passed to heirs tax-free (subject to the 10-year distribution rule for beneficiaries).
Note that this exemption applies only to Roth 401(k)s. Roth IRAs were already exempt from lifetime RMDs, and this status remains unchanged. Traditional 401(k)s and traditional IRAs remain subject to RMDs.
Aggregating RMDs Across Accounts
One of the more convenient aspects of RMD rules is the ability to aggregate distributions. If you hold multiple traditional IRAs, you can calculate the total RMD for all IRAs combined and take the full amount from any one or combination of those IRAs. For example, if you have three IRAs with RMDs of $5,000, $3,000, and $2,000, your total RMD is $10,000. You could withdraw the entire $10,000 from the first IRA, or split it across the three.
However, this aggregation rule does not apply to employer-sponsored plans like 401(k)s, 403(b)s, or 457(b)s. Each 401(k) account must have its RMD calculated and withdrawn separately. You cannot take the RMD from a 401(k) to satisfy an IRA RMD, nor can you combine a 401(k) RMD with an IRA RMD to take the total from one source.
If you have both IRAs and 401(k)s, you must calculate the RMD for each 401(k) separately and take those amounts from those specific accounts. The IRA RMDs can then be aggregated and taken from any of your IRA accounts. This distinction is critical for planning, as it may require multiple withdrawals from different institutions in the same year.
Qualified Charitable Distributions (QCDs)
For retirees aged 70½ or older, Qualified Charitable Distributions (QCDs) offer a strategic way to satisfy RMDs while reducing taxable income. A QCD allows you to donate up to roughly $111,000 per year (2026; the original $100,000 cap is now inflation-indexed) directly from your IRA to a qualified charity. The distribution counts toward your RMD but is excluded from your adjusted gross income (AGI).
This exclusion can be particularly beneficial for retirees who want to minimize their tax liability or reduce the impact of their income on Medicare premiums, which are based on AGI. Unlike a standard charitable deduction, a QCD does not require itemizing. It is available only for IRAs, not for 401(k)s or other employer-sponsored plans. If you have a 401(k) RMD, you cannot satisfy it with a QCD. However, if you have an IRA RMD, you can use a QCD to cover part or all of it.
Planning for the ‘Gap Years’
The period between retirement and the start of RMDs is often referred to as the “gap years.” During this time, retirees typically have lower income, which places them in a lower tax bracket. This is an ideal window for strategic tax planning, particularly Roth conversions.
By converting a portion of a traditional IRA or 401(k) to a Roth IRA during these years, savers can pay taxes on the converted amount at their current, potentially lower, tax rates. This reduces the future balance subject to RMDs and allows for tax-free growth in the Roth account. The goal is to “fill up” lower tax brackets before income from RMDs, Social Security, and other sources pushes the retiree into a higher bracket later in life.
It is important to note that Roth conversions are taxable events. The amount converted is added to your taxable income for the year. Savers should model the impact carefully to ensure that the conversion does not inadvertently push them into a higher marginal tax bracket or trigger additional taxes on Social Security benefits. Working with a tax professional can help optimize the timing and size of these conversions.
Our Framework: The RMD Ramp
Required distributions are not a flat tax — they are a rising one. The RMD Ramp shows the exact percentage of your balance the IRS forces out each year, straight from the Uniform Lifetime Table, so you can plan Roth conversions before the ramp steepens.
RMD % = 1 ÷ (Uniform Lifetime factor for your age).
| Age | Life-expectancy factor | RMD % of balance |
|---|---|---|
| 73 | 26.5 | 3.77% |
| 75 | 24.6 | 4.07% |
| 80 | 20.2 | 4.95% |
| 85 | 16.0 | 6.25% |
| 90 | 12.2 | 8.20% |
The ramp is why the “gap years” before 73 are so valuable: once RMDs begin they pull an ever-larger share of a (hopefully) growing balance into your taxable income, potentially lifting your Medicare premiums and the taxable portion of Social Security. Converting to Roth in your 60s — when the forced percentage is 0% — flattens the ramp before it starts.
Bottom Line
RMD rules have become more complex but offer greater flexibility for long-term planning. The RMD age has increased to 73 for most current retirees, rising to 75 in the coming years. Understanding the calculation using the Uniform Lifetime Table is essential to avoid penalties, which can reach 25% of the shortfall. Roth 401(k) balances are now exempt from lifetime RMDs, enhancing their value as a tax-free legacy vehicle. While IRA RMDs can be aggregated, 401(k) RMDs must be taken separately. Retirees should leverage QCDs for charitable giving and consider Roth conversions during the “gap years” to manage future tax burdens. Proactive planning ensures that RMDs complement, rather than complicate, your retirement income strategy.
This article is for educational purposes only and does not constitute financial advice. Consult a licensed advisor before making retirement decisions.