Required Minimum Distributions: What You Need to Do Each Year

What Required Minimum Distributions Are and When They Start

A Required Minimum Distribution (RMD) is the smallest amount you must withdraw from certain retirement accounts each year once you reach a specific age. The IRS sets this amount based on your age and account balance. If you don't take it, you face a penalty on the amount you should have withdrawn — currently 25% for most people, though it can be lower if you correct the mistake quickly.

For most people, RMDs begin at age 73 (as of 2023; this age has shifted over time due to law changes). The first withdrawal must happen by April 1 of the year after you turn 73. After that, all RMDs are due by December 31 each year. If you miss the deadline, the penalty applies immediately, even if you withdraw the money on January 2.

RMDs apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer retirement plans like 401(k)s and 403(b)s. They do not apply to Roth IRAs while you are alive — though beneficiaries of Roth IRAs do have RMD rules after you pass away. If you have multiple accounts of the same type, you calculate the RMD for each one separately, but you can withdraw the total from any combination of those accounts.

Key Takeaways

• RMDs begin the year you turn 73 and must be withdrawn by December 31 each year, with the first withdrawal allowed until April 1 of the following year.
• The IRS calculates your RMD by dividing your account balance on December 31 of the prior year by a life expectancy factor published in IRS tables.
• Missing an RMD deadline triggers a 25% penalty on the shortfall, though you can reduce it to 10% if you correct it within two years.
• You can take RMDs from any combination of accounts if you have multiple IRAs or employer plans, but each account type is calculated separately.
• Your financial institution or plan administrator should calculate your RMD and notify you, but you are responsible for taking the withdrawal on time.

How the IRS Calculates Your RMD Amount

The calculation itself is straightforward: take your account balance on December 31 of the previous year and divide it by a life expectancy factor from the IRS Uniform Lifetime Table. The IRS publishes updated tables each year, and your factor changes as you age — it gets smaller, which means your RMD gets larger.

For example, if you are 75 and your IRA balance was $500,000 on December 31 of last year, the Uniform Lifetime Table shows a factor of 24.6. You divide $500,000 by 24.6 to get an RMD of about $20,325 for that year. Next year, if your balance is still $500,000 but you are now 76, the factor becomes 23.7, and your RMD rises to about $21,097.

Your bank, brokerage, or plan administrator is required to calculate this for you and send you a notice showing the amount. However, the responsibility to withdraw it and meet the deadline remains yours. Do not assume the institution will automatically process the withdrawal — many will not. You must request it, usually through their website, by phone, or in writing.

The Year-by-Year Withdrawal Timeline

The first RMD has a special rule. If you turn 73 in 2024, your first RMD is due by April 1, 2025. This is called your "required beginning date." Every RMD after that is due by December 31 of that year. If you delay your first withdrawal until April 1, 2025, you will owe two RMDs in 2025 — one for 2024 (by April 1) and one for 2025 (by December 31) — which can push you into a higher tax bracket that year.

Most people take their RMD in December to stay within the calendar year. Some take it in monthly or quarterly installments. The IRS does not care how often you withdraw as long as the total meets the required amount by the deadline. If you take too little, you owe the penalty on the shortfall. If you take too much, the excess simply counts as income that year but does not reduce next year's RMD.

If you are still working and your employer plan allows it, you may be able to delay your RMD from that specific plan until you retire — though this does not apply to IRAs or to plans from previous employers. This is called the "still-working exception," and it requires that you do not own more than 5% of the company. Ask your plan administrator whether your plan offers this option.

What Happens If You Miss a Deadline

The penalty for missing an RMD deadline is steep. As of 2024, the penalty is 25% of the amount you should have withdrawn but did not. If your RMD was $10,000 and you withdrew nothing, you owe a $2,500 penalty to the IRS in addition to owing the income tax on that $10,000.

You can reduce the penalty to 10% if you correct the mistake within two years. This means withdrawing the missed amount and filing Form 5329 with the IRS to report the shortfall and request the reduced penalty. If you catch the error more than two years later, you are stuck with the full 25% penalty.

If you discover you missed a deadline, do not wait. Withdraw the missed amount immediately and contact a tax professional or the IRS to understand your options for reducing the penalty. The sooner you act, the better your chances of a lower penalty.

Coordinating RMDs Across Multiple Accounts

If you have more than one IRA — whether traditional, SEP, or SIMPLE — you must calculate the RMD for each one separately. However, you can withdraw the total amount from any combination of those IRAs. This flexibility lets you consolidate withdrawals or take from whichever account has the lowest fees or best performance.

Employer plans like 401(k)s and 403(b)s are treated differently. You must calculate and take the RMD from each plan separately — you cannot combine them. If you have a 401(k) from a current employer and a 401(k) from a previous employer, each one has its own RMD, and you must withdraw from each one individually.

If you roll over an old employer plan into an IRA, that IRA then becomes part of your IRA group for RMD purposes. This can simplify things if you have several old 401(k)s scattered across different companies. Consolidating them into one IRA means you calculate one RMD and can withdraw from that single account, rather than tracking multiple employer plans.

Tax Withholding and RMD Payments

When you take an RMD, it counts as taxable income for that year. Your financial institution can withhold federal income tax from the withdrawal if you request it, which reduces the amount you receive but also reduces your tax bill when you file. Some people request 20% or 25% withholding to cover their tax liability; others prefer to receive the full amount and pay taxes when they file.

If you are subject to state income tax, you may need to request state withholding separately. Not all institutions offer this, so ask when you request your RMD. If you do not request withholding, you are responsible for paying the tax through quarterly estimated tax payments or by having extra tax withheld from other income like Social Security or a pension.

RMDs are ordinary income, taxed at your regular income tax rate. They do not receive preferential capital gains treatment. If your RMD pushes your income into a higher tax bracket, it can also affect other tax items like Medicare premiums, which are based on income thresholds.

Special Situations: Inherited Accounts and Exceptions

If you inherit a retirement account from someone else, you have different RMD rules depending on who left it to you and when they died. Spouses can roll inherited IRAs into their own IRAs and delay RMDs until their own required beginning date. Non-spouse beneficiaries generally must withdraw the entire account within 10 years, though the rules vary by account type and the beneficiary's relationship to the original owner.

If you are charitably inclined, you can direct your RMD to a may have access to charity directly from your IRA — this is called a "may have access to charitable distribution." The amount goes to the charity tax-free and counts toward your RMD, so you do not owe income tax on it. This strategy works only if you are 70½ or older and the distribution goes directly from the IRA to the charity, not through your hands first.

If you are still working and your employer plan allows the still-working exception, you can delay RMDs from that plan until you retire. This does not apply to IRAs or to plans from previous employers, only to the plan where you currently work. Once you retire or leave that job, RMDs from that plan become due.

Frequently Asked Questions

What if I turn 73 in December — do I have to take an RMD that year?

Yes. If you turn 73 at any point during the year, your first RMD is due by April 1 of the following year. The IRS counts you as age 73 for the entire year once you reach that age, even if your birthday is December 31.

Can I take my RMD as a lump sum or do I have to spread it out?

You can take it however you want — all at once, monthly, quarterly, or in any pattern — as long as the total reaches the required amount by December 31. The IRS does not care how you structure the withdrawals, only that you meet the deadline and the total amount.

Do I have to take an RMD if I don't need the money?

Yes. The RMD is mandatory once you reach age 73, regardless of whether you need the money. The only exception is if you are still working and your employer plan allows the still-working exception. If you don't need the money, you can donate it to charity, reinvest it, or use it for any other purpose, but you must withdraw it.

What if my account value dropped significantly — is my RMD still the same?

Your RMD is based on the account balance on December 31 of the prior year, not the current value. If your account dropped in value during the year, your RMD does not change. However, next year's RMD will be calculated using the new, lower December 31 balance, so it will be smaller.

Can I roll my RMD into another retirement account?

No. Once you withdraw an RMD, it has been distributed and cannot be rolled back into a retirement account. You can reinvest the money in a taxable brokerage account, but it will not have the tax-deferred growth of a retirement account.