If you have money sitting in a Traditional IRA, 401(k), or similar tax-deferred retirement account, the IRS eventually requires you to start withdrawing from it, whether you need the money or not. These required withdrawals, known as RMDs, catch a lot of retirees off guard, both in terms of timing and how the amount is actually calculated. Here's what you need to know heading into 2025-26.
A Required Minimum Distribution (RMD) is the minimum amount the IRS requires you to withdraw each year from certain tax-deferred retirement accounts once you reach a specific age. The rule exists because these accounts let your money grow tax-deferred for decades, the IRS eventually wants to start collecting tax on that money, and RMDs force withdrawals so that taxation actually happens.
RMDs apply to Traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer-sponsored plans like 401(k)s and 403(b)s. Roth IRAs are the notable exception, they are not subject to RMDs during the original account owner's lifetime, since Roth contributions were already taxed going in.
Under the SECURE 2.0 Act, the RMD starting age is now 73 for most account holders (this changed from 72 in recent years, and is scheduled to rise again to 75 starting in 2033 for people born in 1960 or later). Your very first RMD technically has a deadline of April 1 of the year after you turn 73, but every RMD after that must be taken by December 31 of that calendar year.
That first-year rule creates a common trap: if you delay your first RMD until the April 1 deadline, you'll actually need to take two RMDs in that same calendar year (the delayed one, plus the current year's), which can push you into a higher tax bracket than expected. Many financial advisors recommend just taking your first RMD in the year you turn 73 to avoid this bunching effect.
Your RMD isn't a fixed percentage, it's calculated individually each year using this formula:
RMD = Account Balance (as of Dec 31 of prior year) ÷ IRS Life Expectancy Factor
The life expectancy factor comes from IRS tables (most commonly the Uniform Lifetime Table), based on your age. As you get older, the factor gets smaller, which means the percentage of your account you're required to withdraw increases each year. At age 73, the factor is around 26.5, meaning you'd withdraw roughly 3.8% of your balance; by your late 80s, that factor drops enough that you're withdrawing closer to 8-9% annually.
If you have multiple Traditional IRAs, you can calculate the RMD for each one separately but choose to withdraw the total from just one account or split however you like, as long as the total amount comes out. For 401(k)s, the rule is stricter: you generally must calculate and withdraw the RMD from each 401(k) account separately.
Missing an RMD deadline, or withdrawing less than required, triggers an IRS excise tax penalty. As of recent rules, the penalty is 25% of the shortfall, but it drops to 10% if you correct the mistake within two years. This is a meaningful reduction from the old 50% penalty, but it's still an expensive mistake to make, so it's worth setting a calendar reminder well before December 31 each year.
Roth IRAs have never required RMDs for the original owner. As of 2024, this same treatment now extends to Roth 401(k)s, which previously did require RMDs before the rules changed to align them with Roth IRAs. If most of your retirement savings sit in Roth accounts, this can meaningfully simplify your required withdrawal planning in retirement.
Can I reinvest my RMD if I don't need the income? Yes, once you've satisfied the RMD requirement (and paid the resulting tax), you're free to reinvest the after-tax proceeds into a taxable brokerage account or other investment, you just can't put it back into the same tax-deferred retirement account.
Does an inherited IRA have different RMD rules? Yes, inherited IRA rules are more complex and depend on your relationship to the original owner and current SECURE Act rules, which generally require most non-spouse beneficiaries to fully deplete the account within 10 years, sometimes with annual RMDs required within that window.
Should I convert to a Roth IRA to avoid future RMDs? A Roth conversion can reduce future RMD obligations, but it triggers taxable income in the year you convert, so it's worth running the numbers (or discussing with a tax advisor) to see if the long-term RMD savings outweigh the upfront tax cost.
RMD rules can feel like one more complicated layer on top of retirement planning, but the core mechanics are fairly simple once you understand them: figure out your age-based factor, divide your prior year-end balance by it, and make sure the withdrawal happens before the deadline. Getting this right protects you from an avoidable penalty and helps you plan your taxable income for the year.
Not sure which account type makes the most sense for your long-term goals? Take a look at our comparison of an IRA vs 401(k) and see how a Roth IRA might fit into your retirement mix. Want to see your own numbers? Our free RMD Calculator uses the current IRS life expectancy tables to show you exactly what you're required to withdraw this year, and projects your RMDs several years into the future.
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