Required Minimum Distributions

What an RMD is

A required minimum distribution (RMD) is an amount that must be distributed from certain retirement accounts under federal tax rules. RMDs are designed to ensure that tax-deferred retirement assets are eventually distributed and reported. The starting age, deadline, account type, employment status, and beneficiary situation determine when a distribution is required. Missing an RMD can result in an excise tax unless relief applies.

RMD rules are not the same for every account. Traditional IRAs, SEP IRAs, SIMPLE IRAs, employer plans, and inherited accounts have different details. An original Roth IRA owner is generally not required to take lifetime RMDs, while beneficiaries may have required distributions. A designated Roth account in an employer plan can have different treatment under current law.

When RMDs generally begin

Under current federal rules, many account owners begin RMDs at age 73. A later starting age applies to individuals who attain age 74 after 2032 under the statutory change, generally age 75. The required beginning date may also depend on whether the account is an IRA or an employer plan and whether the participant is still working for the plan sponsor. Check the IRS rules for the owner’s birth year and account.

For a traditional IRA, the first RMD is generally due by April 1 of the year after the owner reaches the applicable starting age. Later RMDs are generally due by December 31 each year. Taking the first RMD in the following year means two RMDs may be taxable in that calendar year: the delayed first amount and the current year’s amount. That timing can increase taxable income.

Some workplace plans allow an employee who is still working for the plan sponsor to delay RMDs from that employer’s plan until retirement, subject to plan terms and exceptions for certain owners. This still-working exception generally does not apply to traditional IRAs. A person with several accounts should identify which rules apply to each plan rather than assume that a delayed workplace-plan distribution postpones all IRA RMDs.

How the amount is calculated

A common calculation divides the account balance at the end of the prior calendar year by a life-expectancy factor from the applicable IRS table. The table depends on circumstances, including whether the spouse is the sole beneficiary and more than ten years younger. Inherited accounts use different methods and tables. Custodians may calculate amounts, but the account owner remains responsible for taking the required distribution.

Suppose an IRA had a December 31 balance of $300,000 and the applicable divisor were 25.5. The RMD would be approximately $11,765: $300,000 divided by 25.5. The divisor is hypothetical here; use the current IRS table for the owner’s age and beneficiary facts. Account values, distributions, and multiple-account rules affect the actual calculation.

If an owner has multiple traditional IRAs, the RMD amounts are generally calculated separately but may often be aggregated and withdrawn from one or more of those IRAs. RMDs from employer plans generally cannot be satisfied by taking more from an IRA, and each plan’s distribution rules matter. Inherited IRAs and certain other accounts have their own aggregation rules. Confirm account-type treatment before moving money.

Worked example: first-year timing

Assume an owner turns 73 during one calendar year and has a traditional IRA subject to RMDs. Under the general rule, the first RMD may be delayed until April 1 of the next year. A second RMD for that next year is still generally due by December 31. If each amount were $12,000, the owner could have $24,000 of IRA distributions in that second calendar year, both generally reportable under the applicable rules.

Taking the first distribution by December 31 of the year the owner turns 73 may spread taxable income across two years instead. But the right timing depends on current and expected income, withholding, charitable plans, state taxes, and other facts. The owner should not defer automatically; compare both tax-year scenarios and confirm the deadline.

Traditional IRA RMDs are generally taxable

An RMD from a traditional IRA is generally taxable to the extent it consists of pretax amounts. If the owner has nondeductible basis, Form 8606 may determine the nontaxable portion. RMDs are generally not eligible for rollover into another tax-deferred account; they are distributed to the owner. Withholding can be elected or required under applicable rules, but withholding is not the same as the final tax liability.

An RMD can be satisfied in cash or, where permitted, as an in-kind distribution of securities. An in-kind distribution is generally measured at fair market value on the distribution date for tax reporting; it does not avoid the RMD or tax treatment. The owner can retain the security in a taxable account, but the new account and basis records should be maintained.

Roth accounts and RMDs

The original owner of a Roth IRA generally has no lifetime RMD requirement. That does not mean an inherited Roth IRA is exempt from distributions. Beneficiaries may have annual or deadline-based distribution requirements depending on their relationship to the owner, date of death, and applicable rules. Distributions may be income-tax-free if qualified, while the timing obligation remains.

Designated Roth accounts in employer plans changed under SECURE 2.0 rules: lifetime RMDs generally no longer apply to the original owner of a designated Roth account for years after 2023. The plan’s terms and current IRS guidance should be reviewed. Do not assume that a Roth label alone settles beneficiary deadlines or distribution taxability.

Inherited account rules

Beneficiary RMD rules can require distributions over a life expectancy, under a ten-year period, or under other schedules, depending on beneficiary category and death-date rules. Eligible designated beneficiaries may have different options from most nonspouse beneficiaries. A surviving spouse may be able to treat an inherited account as their own or use other available elections, subject to conditions.

An inherited account can have both annual RMDs and a final depletion deadline. If the original owner died after their required beginning date, annual distributions may be required during the ten-year period under current regulations. A beneficiary should identify the owner’s age, prior RMD status, account type, and beneficiary classification before choosing a distribution schedule.

What happens if an RMD is missed

An RMD shortfall can trigger an excise tax on the amount not distributed by the deadline. Current law generally sets a 25% tax, which may be reduced to 10% if the shortfall is corrected within the applicable correction window and requirements are met. The taxpayer may need to file Form 5329 and request a waiver for reasonable error while taking steps to remedy the shortfall. Confirm current IRS instructions.

For example, if an owner should have distributed $10,000 but took only $7,000 by the deadline, the shortfall is $3,000. A 25% excise tax on that shortfall would be $750 before any correction or waiver. If the owner corrects promptly and qualifies for the reduced rate, the amount could be different. This hypothetical calculation does not determine whether relief applies.

If a custodian miscalculated the amount, the owner should document the issue, distribute the missed amount as soon as practicable, and review Form 5329 instructions. Do not ignore a shortfall because a custodian supplied an incorrect figure. The IRS can consider facts and corrective actions, but a waiver is not automatic.

Qualified charitable distributions

An IRA owner who meets the age requirement may be able to make a qualified charitable distribution (QCD) directly from an IRA to an eligible charity. A qualifying QCD can count toward an RMD and may be excluded from taxable income, subject to annual limits and requirements. A payment made by the account owner to the charity and later reimbursed is not the same as a direct custodian transfer.

A QCD should be coordinated with the custodian, charity, and tax preparer. Some organizations or donor-advised arrangements may not qualify. The owner should maintain acknowledgement and transfer records and report the distribution properly. A QCD can reduce adjusted gross income rather than create a charitable deduction, but actual treatment depends on the current rules and taxpayer circumstances.

Different account types cannot always be combined

The owner must calculate the RMD for each account using its own balance and applicable factor. Certain IRAs can allow aggregation, but the owner cannot generally satisfy an employer-plan RMD by withdrawing extra from an IRA. A 403(b) account may have specific aggregation treatment, while inherited accounts follow separate limits. Confirm account type before using one distribution to meet multiple obligations.

For instance, an owner has one traditional IRA with a $200,000 prior-year balance and an employer plan with a $100,000 balance. The RMDs are calculated separately under each arrangement, even if the owner prefers to take all cash from the IRA. The plan may require a distribution from the plan itself. Taking an extra $5,000 from the IRA does not necessarily satisfy an unfilled plan RMD.

The divisor is not the account owner’s exact life expectancy

The IRS tables use life-expectancy factors as part of a statutory calculation. Most owners use the Uniform Lifetime Table; a different joint life expectancy table may apply when a spouse is the sole beneficiary and more than ten years younger. Beneficiaries may use a different table or a fixed deadline. Do not divide by a personal estimate of remaining life expectancy or use a table copied from an old year.

If a spouse is the sole beneficiary and meets the age difference test, the joint table can produce a larger divisor and therefore a smaller RMD. A later change in beneficiary status or account ownership can affect which table applies in later years. Keep beneficiary forms current and review the calculation after marriage, divorce, death, or a change in account title.

The owner generally recalculates the RMD each year using the prior December 31 balance and the factor for that year’s age or beneficiary situation. Investment gains and losses affect the next year’s required amount. A market decline can lower the upcoming calculation but does not erase the distribution requirement for the current year.

Planning around RMDs

RMDs can affect taxable income, Medicare-related income thresholds, taxation of Social Security, charitable giving, and investment allocation. The account owner can plan withdrawals, withholding, and portfolio liquidity in advance. Avoid waiting until the final days of the year to sell investments or request distributions, especially if the account holds illiquid assets or requires custodian processing.

An RMD is a minimum distribution, not a recommendation to spend the money. The owner can generally reinvest the after-tax amount in a taxable account, subject to suitability and tax consequences. The account may need to retain enough cash or liquid investments for upcoming distributions, while balancing long-term goals and risk.

A practical annual checklist

At the start of each year, list every retirement account, classify it as owner or inherited, note the account type, determine whether the owner is still working, and confirm the applicable starting date. Obtain prior December 31 balances and use the correct IRS table. Review beneficiary designations, charitable intentions, withholding, and deadlines. Confirm the custodian’s calculation and document the amount taken.

For a beneficiary account or unusual plan, get qualified tax help before distributing. Rules may depend on death dates, designated beneficiaries, spouse status, plan terms, and prior RMDs. Keep copies of statements, calculation worksheets, transfer confirmations, Form 1099-R, and Form 5329 if relevant. A recurring calendar reminder can prevent an avoidable shortfall.

Key takeaway

RMDs are account-specific required withdrawals governed by age, account type, employment status, and beneficiary rules. Calculate using the correct prior-year balance and IRS factor, meet the applicable deadline, and understand tax reporting. The original Roth IRA owner generally has no lifetime RMD, but beneficiaries may. Current IRS forms and instructions control.