Required Minimum Distribution (RMD)

RMDs exist because the tax code lets money grow untaxed in a traditional IRA or workplace plan, but not forever: the minimums force it out gradually so it is eventually taxed.

An RMD is a floor, not a target: you can always withdraw more. Each dollar is taxed as ordinary income in the year it comes out, except any after-tax basis in the account. Your custodian or plan may calculate the figure, but the IRS holds you responsible for taking the right amount on time.

Start with each account’s balance at the close of business on December 31 of the prior year, even if markets have moved since. Divide it by the distribution period for the age you reach this year, from the Uniform Lifetime Table in IRS Publication 590-B. At 73 the divisor is 26.5, so the RMD is about 3.8% of the balance. If your spouse is your sole beneficiary and more than 10 years younger, you use the Joint Life and Last Survivor Table instead, which gives a longer period and a smaller RMD.

Where the money comes from depends on the account type. You figure each IRA’s RMD separately but may take the combined total from any one or more of your IRAs, and the same goes for several 403(b) contracts. A 401(k) or 457(b) RMD must come out of that plan itself.

Your first RMD is for the year you reach the RMD age set by the SECURE 2.0 Act, but you may delay it until April 1 of the following year, your required beginning date. Every later RMD is due by December 31. If you were born in 1953, you turn 73 in 2026: your first RMD is for 2026 and is due by April 1, 2027. Waiting that long puts your 2027 RMD, due December 31, 2027, in the same tax year, so two taxable withdrawals land together. Anyone who turned 73 in 2025 and deferred faces that double-up in 2026.

If you are still working past RMD age, your current employer’s plan may let you wait until April 1 after the year you retire, unless you own more than 5% of the business. That exception never applies to IRAs, including SEP and SIMPLE IRAs, and it does not cover plans from former employers.

Missing an RMD, or taking too little, triggers an excise tax of 25% of the shortfall, cut to 10% if you correct it within two years. You report it on Form 5329 with your return for the year the RMD was missed. The IRS can waive the tax when the shortfall came from reasonable error and you are taking reasonable steps to fix it: withdraw the missed amount, then file Form 5329 with a letter of explanation.

An RMD also cannot be rolled over or converted. A Roth conversion in an RMD year works only on dollars above the minimum, which must come out first. A qualified charitable distribution from an IRA, by contrast, does count toward it.

Every RMD dollar is ordinary income, so the forced withdrawal can cost more than its size suggests. It can push you into a higher bracket, make more of your Social Security taxable through the tax torpedo, and raise the income Medicare uses for IRMAA surcharges two years later. The divisor also shrinks every year, so the required share of the balance climbs with age, from 3.8% at 73 to 8.2% at 90.

The main levers work before or around the start date. Roth conversions, or larger pre-tax withdrawals that fill low brackets in the years between retirement and RMD age, shrink the balance future RMDs are based on. From age 70½, QCDs send IRA money to charity without it counting as income. A QLAC bought with up to $210,000 of retirement money in 2026 keeps that amount out of the RMD calculation until its payments begin. Taking employer stock out of a 401(k) under the net unrealized appreciation rules removes those shares from the RMD base. Which lever helps depends on your income path, so RMDs are best planned inside a tax-efficient withdrawal strategy rather than one year at a time.

Most RMD problems are timing and bookkeeping errors, not arithmetic, and the excise tax applies either way. They cluster in the first two RMD years, after a job change leaves money in an old plan, and after an inheritance. If you hold accounts at several firms, check each plan’s minimum and the combined IRA total yourself well before December 31, because no single custodian sees them all and transfers take time to process.