Required minimum distributions: when they start and how much

When do required withdrawals start?

Traditional retirement accounts let your money grow without yearly tax, but the government eventually requires you to start withdrawing and paying tax on it. These required withdrawals are called required minimum distributions, or RMDs.

The age was raised by the SECURE 2.0 Act. If you were born earlier than 1951, you are likely already taking them.

How the amount is figured

Each year, the required amount is your account balance at the end of the previous year, divided by a number from an IRS table. At 75 that divisor, from the Uniform Lifetime Table, is 24.6. The divisor gets smaller as you age, so the required percentage rises.

For example, for a $260,000 balance at 75: $260,000 ÷ 24.6 = about $10,569 for the year. That is roughly 4.1% of the balance. (This ignores any growth. Your own number depends on your actual balance.)

Which accounts have RMDs

• Yes: traditional IRAs, SEP and SIMPLE IRAs, and traditional 401(k)s and 403(b)s.
• No, during your life: Roth IRAs. Since 2024, Roth 401(k)s no longer have RMDs during the owner's life either.
• Different rules: inherited accounts. Ask a professional.

If you have several traditional IRAs, you calculate each one but can take the total from any of them. 401(k)s are handled account by account. If you are still working and do not own 5% or more of the company, you can usually delay the RMD on that employer's 401(k) until you retire. That exception does not apply to IRAs.

The deadline and the penalty

Your RMD is due by December 31 each year. For your first one only, you can wait until April 1 of the following year, but then you must take two in that same year, which can push you into a higher bracket. Many people take the first one in the year they turn the age.

If you miss it, the penalty is 25% of the amount you should have taken. It drops to 10% if you correct the mistake in a timely way. Your plan or IRA provider can usually calculate the amount and set up automatic withdrawals.

Why RMDs matter for planning

A big traditional balance creates a big required withdrawal at 75, and it counts as income whether you need the money or not. That extra income can:

• push you into a higher tax bracket,
• make more of your Social Security taxable (how),
• raise your Medicare premiums two years later (how).

This is the main reason people consider converting some money to a Roth earlier, in smaller slices. The Roth conversion guide shows the checks.

Giving to charity from an IRA

If you are 70½ or older and give to charity, you can send money directly from your IRA to a qualified charity. This is called a qualified charitable distribution (QCD). It can count toward your RMD, and the amount is not added to your taxable income. There is a yearly limit, and the money must go directly to the charity, so ask your IRA provider and a tax professional how it works.