RMDs Explained: Required Minimum Distributions, the SECURE 2.0 Rules, and How to Soften the Tax Hit

What Is a Required Minimum Distribution?

A Required Minimum Distribution (RMD) is the minimum amount the IRS forces you to withdraw from your tax-deferred retirement accounts each year once you reach a certain age. For decades, money in a Traditional IRA or 401(k) grows untouched by taxes. RMDs are the moment the IRS collects: the agency lets you defer tax on contributions and growth, but not forever. Eventually, it requires you to pull money out — and pay ordinary income tax on it — whether you need the cash or not.

That last phrase is the heart of the problem. RMDs are not based on your spending needs. They are based on a formula tied to your account balance and your age. A retiree with a generous pension, Social Security, and a seven-figure IRA may be forced to withdraw tens of thousands of dollars they don't need, stacking taxable income on top of income they already have.

Which Accounts Are Subject to RMDs

RMDs apply to virtually every tax-deferred retirement account:

• Traditional IRAs
• SEP and SIMPLE IRAs
• 401(k) plans
• 403(b) plans
• 457(b) governmental plans
• The federal Thrift Savings Plan (TSP)

RMDs do not apply to:

• Roth IRAs — never, during the original owner's lifetime
• Roth 401(k)s and Roth 403(b)s — as of 2024, thanks to SECURE 2.0 (more on this below)
• Taxable brokerage accounts, which were never tax-deferred to begin with

The dividing line is simple: if you got a tax deduction going in and the account has grown tax-deferred, the IRS wants its share, and RMDs are how it gets paid.

When RMDs Begin: the SECURE 2.0 Age Schedule

The starting age for RMDs has moved twice in recent years. The original age was 70½. The SECURE Act of 2019 raised it to 72. SECURE 2.0 (enacted late 2022) raised it again — and added a future step to 75. Your starting age depends on your birth year:

If you were born between 1951 and 1959, your first RMD year is the year you turn 73. If you were born in 1960 or later, you get a longer runway — your first RMD year is the year you turn 75.

The Required Beginning Date — and the Two-RMDs-in-One-Year Trap

Your first RMD has a special deadline. You can delay it until April 1 of the year after you reach your RMD age. This date is called the Required Beginning Date (RBD). Every RMD after the first must be taken by December 31 of that year.

That flexibility hides a trap. If you push your first RMD into the following year to April 1, you still owe your second RMD by December 31 of that same year — which means two taxable distributions land in one tax year.

Consider someone who turns 73 in 2026:

• Option A: Take the first RMD by December 31, 2026. One distribution in 2026, one in 2027 — spread across two tax years.
• Option B: Delay the first RMD to April 1, 2027. Now both the 2026 RMD and the 2027 RMD fall in 2027 — doubling that year's RMD income.

For most retirees, taking the first RMD in the first year (Option A) avoids an avoidable income spike that can push you into a higher bracket, trigger IRMAA Medicare surcharges, or increase the taxable share of Social Security. The April 1 deferral only helps in narrow cases — for instance, if you retire mid-year and expect dramatically lower income the following year.

How RMDs Are Calculated

The formula is straightforward:

RMD = Prior year-end account balance ÷ Life expectancy factor

The balance is the fair market value of the account on December 31 of the previous year. The life expectancy factor comes from the IRS Uniform Lifetime Table, which most retirees use. (Two exceptions: a separate Joint Life table applies if your sole beneficiary is a spouse more than 10 years younger, and inherited accounts use the Single Life table.)

Here is an excerpt of the current Uniform Lifetime Table (updated in 2022 to reflect longer life expectancies, which slightly reduced RMDs):

Worked example. Suppose you turn 73 this year with a $1,000,000 Traditional IRA balance as of last December 31:

$1,000,000 ÷ 26.5 = $37,736

You must withdraw at least $37,736 and pay ordinary income tax on the full amount. Notice the factor shrinks every year as you age — meaning the percentage of your account you must withdraw rises over time. At 73 you're withdrawing about 3.8% of the balance; by 85 it's roughly 6.25%; by 95, over 11%. RMDs accelerate exactly when many retirees least want the extra taxable income.

The Penalty for Missing an RMD

Missing an RMD used to carry one of the harshest penalties in the tax code: a 50% excise tax on the amount you failed to withdraw. SECURE 2.0 softened it considerably:

• The penalty is now 25% of the shortfall.
• It drops to 10% if you correct the mistake within the two-year correction window and file Form 5329.

Even at 25%, this is a penalty worth never paying. If your RMD was $40,000 and you took nothing, the penalty alone is $10,000 — on top of the income tax you'll owe once you do take the distribution. The fix when you miss one is to withdraw the shortfall promptly, file Form 5329, and attach a brief statement of reasonable cause; the IRS has historically been willing to waive the penalty for honest, promptly corrected errors.

Aggregation Rules: Which Accounts Can Be Combined

If you hold several retirement accounts, you must calculate the RMD for each account separately — but whether you can satisfy them from a single account depends on the account type:

• IRAs (Traditional, SEP, SIMPLE): Calculate each one's RMD, then take the total from any one IRA or any combination. The IRS only cares that the aggregate comes out.
• 403(b)s: Same flexibility — aggregate the RMDs and pull the total from any one 403(b).
• 401(k)s and other employer plans: No aggregation. Each 401(k) must distribute its own RMD separately. You cannot satisfy a 401(k) RMD from an IRA, or from another 401(k).

Roth Accounts and RMDs

Roth IRAs have never required distributions during the original owner's lifetime — one of their defining advantages. A Roth IRA can grow untouched for your entire life and pass to heirs without you ever being forced to draw it down.

Until recently, Roth 401(k)s were the awkward exception: they were subject to RMDs, even though the money was already taxed. SECURE 2.0 fixed this. Beginning in 2024, Roth balances inside employer plans (Roth 401(k)s and Roth 403(b)s) are no longer subject to RMDs during the owner's lifetime, bringing them in line with Roth IRAs.

This change strengthens the case for shifting tax-deferred money into Roth accounts before RMDs begin: every dollar converted to Roth is a dollar permanently removed from the RMD calculation.

The Still-Working Exception

If you're still employed past your RMD age, you may be able to delay RMDs from your current employer's plan. The "still-working" exception lets you postpone RMDs from a 401(k) or 403(b) at the company where you currently work, until April 1 after you finally retire — provided you do not own more than 5% of the business.

Two important limits:

1. The exception applies only to your current employer's plan. RMDs from IRAs and from former employers' plans are still required on the normal schedule.
2. It does not apply to IRAs at all, ever — including SEP and SIMPLE IRAs.

Why RMDs Are a Tax Problem, Not Just a Chore

For retirees with substantial tax-deferred balances, RMDs aren't merely paperwork — they're the trigger for a cascade of stacked costs:

• Bracket creep. RMDs are ordinary income. Layered on top of pensions and Social Security, they can push a retiree into a higher marginal bracket than they ever expected.
• The Social Security "tax torpedo." Rising income from RMDs can increase the share of Social Security benefits subject to tax — up to 85% of the benefit.
• IRMAA surcharges. A large RMD can push MAGI across an IRMAA bracket, raising Medicare Part B and Part D premiums two years later.
• The widow's penalty. When one spouse dies, the survivor files as single — with brackets roughly half as wide — while RMDs on the inherited balances continue. The same income suddenly lands in a far higher bracket.

The throughline: RMDs don't operate in isolation. The size of your RMD ripples into your tax bracket, your Medicare premiums, and your spouse's future tax bill. That's why the smartest RMD planning happens years before the first distribution.

Strategies to Reduce Future RMDs

The best time to manage RMDs is long before they begin. The most effective levers:

1. Roth Conversions in the Gap Years

Converting tax-deferred dollars to Roth in the low-income years between retirement and your RMD start age does two things at once: it fills up lower tax brackets at today's known rates, and it permanently shrinks the balance that future RMDs are calculated on. Done across several years, bracket-aware conversions can dramatically flatten the RMD spike. See our full guide to Roth conversions for sizing them by bracket.

2. Qualified Charitable Distributions

Once you reach age 70½, you can direct IRA money straight to charity through a Qualified Charitable Distribution (QCD). A QCD counts toward your RMD but is excluded from your AGI — the single most tax-efficient way for charitably inclined retirees to satisfy an RMD. The annual QCD limit is indexed for inflation (over $100,000 per person and rising each year). Because it never touches AGI, a QCD also sidesteps IRMAA and Social Security taxation in a way that taking the RMD and then donating it cannot.

3. Coordinate the Withdrawal Sequence

How you draw down accounts in your 60s shapes how large your RMDs become in your 70s. Thoughtful withdrawal sequencing — spending from tax-deferred accounts earlier, before RMDs are forced — can smooth lifetime taxes rather than backloading them into a single forced spike.

4. Don't Forget the QCD Age Quirk

Note the mismatch: QCDs become available at 70½, but RMDs no longer begin until 73 or 75. That means there's a window where you can start using QCDs to draw down your IRA charitably before RMDs even start — pre-shrinking the balance and the eventual RMD.

Inherited IRAs and the 10-Year Rule

RMD rules don't end when the original owner dies — they change. Under the SECURE Act, most non-spouse beneficiaries (such as adult children) can no longer "stretch" distributions over their own lifetime. Instead, they must empty the inherited account within 10 years of the owner's death.

The IRS finalized a wrinkle that surprised many: if the original owner had already started taking RMDs, the beneficiary must take annual RMDs in years 1 through 9 and fully empty the account by the end of year 10. If the owner died before their RMDs began, the beneficiary can skip the annual distributions and simply empty the account by year 10.

The practical effect is harsh: heirs often inherit a large IRA precisely during their own peak earning years, and the compressed 10-year window can force big distributions into their highest-tax decade. This is yet another reason Roth conversions during the original owner's lifetime can be so valuable — a Roth IRA still must be emptied within 10 years, but the distributions are tax-free to the heir.

The Bottom Line

RMDs are the IRS collecting on a decades-old deferral, on a schedule you don't control. The mechanics are simple — prior year-end balance divided by a life expectancy factor — but the consequences ripple far beyond the withdrawal itself, touching your tax bracket, your Medicare premiums, the taxation of your Social Security, and your heirs' eventual tax bill.

The retirees who handle RMDs well rarely do anything clever in the year the RMD is due. They did the work years earlier — converting to Roth in low-income gap years, using QCDs to give efficiently, and sequencing withdrawals to keep any single year from spiking. By the time the first RMD arrives, the balance has already been managed down and the surrounding tax picture is under control.

Before you reach your RMD age, map your tax-deferred balances forward and project what your RMDs will look like at 73, 80, and 85. The number is almost always larger than retirees expect — and the time to do something about it is now, not when the first distribution comes due.

This article is for educational purposes only and does not constitute tax or financial advice. RMD ages, penalties, QCD limits, and inherited-account rules are governed by SECURE 2.0 and IRS regulations that change over time. Consult a qualified tax professional or financial advisor and confirm current figures with IRS guidance before making decisions.