Everything You Need to Know About Required Minimum Distributions

Required minimum distributions are the minimum amounts the IRS requires you to withdraw each year from tax-deferred retirement accounts such as traditional IRAs, 401(k)s, and 403(b)s. According to IRS guidance on RMDs, these rules exist to ensure that tax-deferred savings are eventually taxed rather than passed on indefinitely.

The rules changed significantly under the SECURE 2.0 Act of 2022, and understanding them now can prevent costly mistakes in retirement planning.

When Do Required Minimum Distributions Start?

Required minimum distributions begin at age 73 for most retirement account holders, thanks to changes made by the SECURE 2.0 Act. If you turned 72 before January 1, 2023, the prior age-72 rule still applies to you.

Your first RMD can be delayed until April 1 of the year following the year you turn 73. However, delaying means taking two distributions in the same calendar year, which could push you into a higher tax bracket. Every subsequent RMD must be taken by December 31 of that year.

If you are still working and do not own more than 5% of the company sponsoring your plan, you may be able to delay RMDs from your current employer’s 401(k) until you retire. This exception does not apply to IRAs or old 401(k)s from previous employers.

How Are Required Minimum Distributions Calculated?

Your RMD is calculated by dividing your account balance as of December 31 of the prior year by a life expectancy factor from the IRS Uniform Lifetime Table. The IRS updated these tables in 2022, which slightly reduced required withdrawal amounts.

For example, a 75-year-old with a $500,000 IRA balance would use a life expectancy factor of 24.6, resulting in an RMD of approximately $20,325. Each financial institution holding your retirement account is required to notify you of your RMD amount, but the responsibility for taking the correct withdrawal falls on you.

Accounts Subject to RMD Rules

The following account types are subject to required minimum distribution rules according to IRS retirement plan guidelines:

• Traditional IRAs
• 401(k), 403(b), and 457(b) plans
• SEP-IRAs and SIMPLE IRAs
• Inherited IRAs (with separate rules)

Roth IRAs are a notable exception — they have no RMD requirement during the original owner’s lifetime. If you are weighing account types, our comparison of Roth IRA vs Traditional IRA tax advantages covers this distinction in detail.

What Happens If You Miss a Required Minimum Distribution?

Missing a required minimum distribution triggers a penalty equal to 25% of the amount you failed to withdraw. This rate was reduced from 50% by the SECURE 2.0 Act and drops further to 10% if you correct the missed RMD within two years.

The IRS does allow penalty waivers in cases of reasonable error. You must file IRS Form 5329 and attach a letter of explanation requesting a waiver. The IRS has historically been receptive to first-time errors corrected promptly, according to IRS Form 5329 guidance.

What Strategies Reduce the Tax Burden of Required Minimum Distributions?

Required minimum distributions are taxed as ordinary income, so a large RMD can push you into a higher bracket or trigger Medicare surcharges. Several legal strategies can reduce this impact significantly.

Qualified Charitable Distributions (QCDs)

If you are age 70½ or older, you can make a Qualified Charitable Distribution (QCD) of up to $105,000 per year (2024 limit, indexed for inflation) directly from your IRA to an eligible charity. The QCD counts toward your RMD but is excluded from taxable income, according to IRS QCD rules.

Roth Conversions Before Age 73

Converting traditional IRA funds to a Roth IRA before your RMD start date reduces the balance subject to future required minimum distributions. You pay taxes on the conversion now but eliminate RMDs on that portion entirely. This strategy pairs well with planning covered in our guide to retirement withdrawal strategies beyond the 4% rule.

Still-Working Exception

If you continue working past age 73 and own less than 5% of your employer’s company, you can defer RMDs from your current employer’s plan until retirement. Rolling old 401(k)s into your current plan can shelter those assets too.

For retirees also navigating Social Security timing alongside RMDs, our analysis of whether to delay Social Security to age 70 explains how coordinating both decisions can reduce lifetime taxes.

How Do RMD Rules Work for Inherited IRAs?

Inherited IRAs follow different required minimum distribution rules depending on your relationship to the original owner and when the account was inherited. The SECURE Act of 2019 eliminated the “stretch IRA” strategy for most non-spouse beneficiaries.

Most non-spouse beneficiaries who inherit IRAs after January 1, 2020 must empty the account within 10 years of the original owner’s death. Annual RMDs within that 10-year window are required if the original owner had already begun taking distributions, based on IRS inherited IRA guidance.

Surviving Spouse Exception

Surviving spouses have more flexibility. They can roll the inherited IRA into their own IRA, treating it as their own — delaying RMDs until age 73 under their own timeline. They can also elect to be treated as the beneficiary and delay withdrawals until the deceased spouse would have turned 73.

If you are a freelancer or self-employed individual managing retirement accounts like a SEP-IRA, understanding both ownership and inherited rules is critical. Our breakdown of SEP-IRA vs Solo 401(k) for self-employed savers addresses how these accounts interact with RMD rules.

Frequently Asked Questions

At what age do required minimum distributions start in 2025?

Required minimum distributions begin at age 73 in 2025 for anyone who turns 73 on or after January 1, 2023. Under SECURE 2.0, the RMD age will increase to 75 starting in 2033. If you turned 72 before 2023, the older rules still apply to you.

Do Roth IRAs have required minimum distributions?

No. Roth IRAs do not have required minimum distributions during the original owner’s lifetime. This is one of their key tax advantages. However, inherited Roth IRAs are subject to the 10-year withdrawal rule for most non-spouse beneficiaries.

What is the penalty for not taking an RMD?

The penalty for missing a required minimum distribution is 25% of the amount not withdrawn, reduced from 50% under the SECURE 2.0 Act. The penalty drops to 10% if you take the missed distribution and correct the shortfall within two years.

Can you reinvest your RMD after taking it?

Yes. Once you withdraw your RMD, it is treated as ordinary income and you can reinvest it in a taxable brokerage account, savings account, or any non-retirement vehicle. You cannot return it to the IRA or roll it over into another tax-deferred account.

Does a 401(k) have the same RMD rules as an IRA?

Generally yes, but with one key exception. If you are still working at age 73 and own less than 5% of your employer’s company, you can delay RMDs from your current employer’s 401(k) until you retire. This exception does not apply to traditional IRAs or previous employer plans.

How are required minimum distributions taxed?

Required minimum distributions from traditional IRAs and 401(k)s are taxed as ordinary income in the year you take them. They do not qualify for long-term capital gains rates. Large RMDs can trigger higher Medicare Part B and Part D premiums through the Income-Related Monthly Adjustment Amount (IRMAA).