Required Minimum Distributions
RMDs: the tax bill you cannot ignore
Starting at age 73, the IRS requires you to withdraw from your retirement accounts — whether you need the money or not. Planning ahead can significantly reduce the tax impact.
What are Required Minimum Distributions?
For decades, your IRA and 401(k) grew tax-deferred. The IRS eventually wants its share. Required Minimum Distributions (RMDs) force you to withdraw a minimum amount each year starting at age 73. These withdrawals are fully taxable as ordinary income — and they can trigger a cascade of other tax consequences if you are not prepared.
The RMD rules you need to know
When RMDs begin
RMDs start at age 73 for most people (age 75 if born in 1960 or later, under current law). Your first RMD can be delayed until April 1 of the year after you turn 73 — but taking two RMDs in one year can push you into a higher bracket.
How RMDs are calculated
Your RMD is calculated by dividing your account balance (as of December 31 of the prior year) by a life expectancy factor from IRS tables. As you age, the factor decreases, requiring larger withdrawals as a percentage of your balance.
The penalty for missing an RMD
Failing to take your full RMD results in a 25% excise tax on the amount not withdrawn (reduced to 10% if corrected within two years). This is one of the most expensive mistakes in retirement planning.
Which accounts are subject to RMDs
Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and 457(b)s are all subject to RMDs. Roth IRAs are NOT subject to RMDs during the owner's lifetime — a key advantage of Roth accounts.
Strategies to reduce your RMD tax impact
Roth conversions before RMDs begin
Converting traditional IRA funds to a Roth IRA in the years before age 73 reduces the balance subject to RMDs. This is one of the most powerful strategies available to pre-retirees and early retirees.
Qualified Charitable Distributions (QCDs)
If you are 70.5 or older, you can donate up to $105,000 per year directly from your IRA to a qualified charity. QCDs count toward your RMD and are excluded from taxable income entirely.
Aggregating RMDs across accounts
If you have multiple traditional IRAs, you can take the total RMD from any one or combination of those accounts. This flexibility allows you to manage which accounts you draw down first.
Reinvesting RMDs you do not need
If you do not need the RMD for living expenses, you can reinvest it in a taxable brokerage account. While you cannot put it back into an IRA, it can continue to grow — now with more favorable capital gains tax treatment.
Common questions
Get ahead of your RMD tax bill
We help retirees and pre-retirees develop a multi-year strategy to minimize the tax impact of Required Minimum Distributions.
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