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The basics
An RMD is a tax rule that eventually forces money out of tax-deferred retirement accounts. The withdrawal becomes cash available to the plan and is generally ordinary income; it is not an extra fee and it does not disappear.
Illustrative numbers
A simple age-73 example
Prior year-end eligible balance$1,000,000
Age-73 divisor26.5
Gross RMD$37,736
The model adds $37,736 of gross cash and ordinary income, then recalculates tax. Any amount not needed for spending remains available for the plan’s normal surplus treatment.
Calculation transparency
How it works in MoneyWhatIf
- 01
The starting age is 73 for owners born before 1960 and 75 for owners born in 1960 or later.
- 02
The IRS Uniform Lifetime Table supplies an age-based distribution-period number for each owner; the model divides each eligible pre-tax balance by that number using the owner’s whole age in the plan year.
- 03
A married owner whose spouse is more than ten years younger divides by the IRS Joint Life and Last Survivor Table instead — the longer joint expectancy the regulations grant a sole-beneficiary spouse — through the year that spouse dies, after which the Uniform table resumes.
- 04
RMDs are processed before discretionary gap-funding withdrawals. The model records the gross distribution, the tax it creates, and the owner-level amount.
- 05
A plan that declares charitable giving with the QCD switch on pays it from the IRA once the owner reaches the qualifying age: the gift is excluded from income, counted toward the RMD, and capped at the statutory annual limit.
- 06
A Roth conversion is not counted toward the RMD itself; it changes later eligible balances and therefore may change later RMDs.
Keep in mind
Model limits
The annual model does not choose an intra-year payment date or model the special first-RMD April 1 deferral choice.
Inherited-account schedules are modeled separately; plan-specific still-working exceptions are not represented as RMD elections.
This explanation documents the planning model. It is educational, not individualized tax, legal, Medicare, or investment advice.
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The words behind it
Related financial terms
Plain-English definitions, with 2026 figures and worked examples, from the financial terms glossary.