Required minimum distributions (RMDs) force you to start withdrawing — and paying tax on — money from traditional retirement accounts once you reach a certain age, whether you need the cash or not. SECURE 2.0 pushed the starting age back and cut the penalty for missing a distribution, but the rules still catch people off guard every year.
The Age Rule: 73, Then 75
Under SECURE 2.0, the RMD starting age is 73 for anyone born between 1951 and 1959. If you were born in 1960 or later, your RMD age moves to 75. There’s no gradual phase-in between the two — your birth year determines which age applies to you, full stop.
Your very first RMD has a special deadline: you can delay it until April 1 of the year after you reach your RMD age, instead of taking it by December 31 like every RMD after that. The catch is that delaying the first one means you’ll take two RMDs in the same calendar year (the delayed one plus the normal one for that year), which can push you into a higher tax bracket than spreading them out would have. Whether to delay depends on what your income looks like in each of those two years — it’s a calculation worth running rather than defaulting to.
How Much You Have to Take
Your RMD is calculated by dividing your prior-year-end account balance by a life-expectancy factor from IRS tables (the Uniform Lifetime Table for most owners). The percentage of your balance you must withdraw rises each year as the divisor shrinks. This applies separately to each traditional IRA, 401(k), 403(b), and similar pre-tax account you own, though IRA owners can total up the RMDs from all their IRAs and take the sum from just one of them; 401(k) and 403(b) RMDs generally have to come out of each plan separately.
The Penalty Got Smaller — But It’s Not Gone
Missing an RMD used to carry a 50% excise tax on the shortfall. SECURE 2.0 cut that to 25%, and if you catch and correct the mistake within two years, it drops further to 10%. The IRS can also waive the penalty entirely if you can show the shortfall was a reasonable error and you fix it promptly — but that requires filing Form 5329 and a written explanation, not just assuming you’re covered.
Roth Accounts Are Treated Differently
Roth IRAs have never been subject to RMDs during the original owner’s lifetime. As of 2024, that same treatment extends to Roth 401(k) and Roth 403(b) accounts — you no longer have to roll a Roth 401(k) into a Roth IRA just to avoid lifetime RMDs. Traditional accounts, including traditional 401(k)s you didn’t roll into an IRA, are still on the hook.
Planning Around RMDs Before They Start
Because RMDs are taxed as ordinary income and can’t be avoided once they begin, the years before your RMD age are the window to shrink the balance that will eventually be forced out. That’s the same logic behind Roth conversion strategies: converting traditional balances to a Roth IRA during lower-income years reduces the pre-tax balance subject to future RMDs, at the cost of paying tax on the conversion now. It’s also worth checking your retirement account contribution limits each year, since maximizing tax-advantaged savings while working is what creates the RMD problem you’ll manage later — a good problem to have, but a problem to plan around nonetheless.
If you’re charitably inclined, a Qualified Charitable Distribution (QCD) lets you send up to the annual QCD limit directly from an IRA to a qualified charity, and the amount counts toward your RMD without being added to your taxable income — one of the few ways to satisfy an RMD without increasing your tax bill.
Affiliate Disclosure: This page may contain affiliate links. If you make a purchase or sign up through these links, we may earn a commission at no extra cost to you.
Recent Comments