One of the most important retirement rules to understand is Required Minimum Distributions, or RMDs. After a certain age, the IRS generally requires you to begin withdrawing money from most tax-deferred retirement accounts, including traditional 401(k)s and traditional IRAs. RMDs exist to ensure savings that received tax advantages during your working years are eventually withdrawn and taxed.
What is an RMD?
An RMD is the minimum amount you must withdraw from your retirement account each year once you reach the IRS’s required beginning age. The amount is calculated from your account balance and a life expectancy factor published by the IRS — so the required withdrawal usually changes from year to year.
When do RMDs begin?
Under current rules RMDs generally begin at age 73, though the applicable age can change with legislation. Your first RMD is generally due by April 1 of the year after you reach the required beginning age; after that, they’re generally due by December 31 each year.
How is the amount calculated?
The IRS periodically updates its Uniform Lifetime Table, which supplies the life expectancy factor used in the calculation. Rather than estimating your own life expectancy, you look up the factor that corresponds to your age.
At 73, the Uniform Lifetime Table gives a life expectancy factor of 26.5. With a $500,000 account balance, your RMD is $500,000 ÷ 26.5 = $18,868 — the minimum you must withdraw that year.
How RMDs grow over time
As you age, the life expectancy factor gets smaller, so a larger percentage of your account must come out each year. Holding the balance constant at $500,000 for illustration:
- Age 73: about $18,868 ($500,000 ÷ 26.5)
- Age 75: about $20,325 ($500,000 ÷ 24.6)
- Age 80: about $24,752 ($500,000 ÷ 20.2)
- Age 85: about $31,250 ($500,000 ÷ 16.0)
Your actual balance will change over time, but the example shows how the required withdrawal percentage generally rises with age.
What happens if you don’t take one?
Failing to withdraw the full required amount can trigger a significant IRS penalty on the shortfall. Many plan providers offer reminders or help with the calculation, but the account owner is ultimately responsible for withdrawing the correct amount, so track the deadlines carefully.
Are RMDs taxable?
In most cases, yes. Withdrawals from traditional 401(k)s and traditional IRAs are generally taxed as ordinary income in the year you receive them.
If your RMD is $20,000 and you have no after-tax basis in the account, that $20,000 is generally added to your taxable income for the year.
What about Roth accounts?
- Roth IRAs: generally not subject to RMDs during the original owner’s lifetime
- Roth 401(k)s: under current federal rules, RMD requirements have largely been eliminated for many participants beginning in 2024 — still worth verifying how the rules apply to your situation
Can you withdraw more than the RMD?
Yes — the RMD is a minimum, not a cap. You can take additional withdrawals if you need more income, but distributions from tax-deferred accounts may also be taxable, so consider the effect on your overall tax picture.
The bottom line
RMDs are an important part of retirement planning. Once you reach the required beginning age, you’ll generally need to withdraw a minimum amount from most traditional retirement accounts each year. Understanding when they start, how they’re calculated, and how they’re taxed helps you avoid penalties and plan your income more effectively. If RMDs are on the horizon for you, talk with your plan provider or a financial professional.
This article is for general educational purposes only and is not tax, legal, or investment advice. Consider your own situation and consult a qualified professional before making decisions about your retirement account.