RMDs are not exciting.
They are also one of the most predictable places retirement tax planning can go sideways when nobody pays attention until the calendar is already yelling.
RMD stands for required minimum distribution. It is the minimum amount the IRS requires certain retirement-account owners to withdraw each year once they reach the applicable starting age.
The mistake is thinking RMDs are just a rule page. They are not. They affect:
- taxable income,
- Medicare premiums,
- charitable giving strategy,
- withdrawal sequencing,
- and in some cases the comfort level of the entire retirement plan.
So yes, we need the rule. But we also need the planning.
What RMDs are and why they exist
Most tax-deferred retirement accounts are designed to postpone taxation, not eliminate it forever.
RMD rules are how the government eventually gets invited back into the room.
Once RMDs begin, the account owner generally must withdraw at least a minimum amount each year based on the prior year-end balance and an IRS life-expectancy table.
You can always withdraw more than the minimum. You just cannot ignore the minimum.
Which accounts require RMDs and which do not
This is the first place people get mixed up.
Accounts that generally require RMDs
Under current IRS guidance, RMD rules generally apply to:
- traditional IRAs,
- SEP IRAs,
- SIMPLE IRAs,
- 401(k) plans,
- 403(b) plans,
- 457(b) plans,
- and other defined-contribution retirement plans.
Accounts that generally do not require RMDs while you are alive
IRS guidance says owners of Roth IRAs do not have lifetime RMDs.
The IRS also says designated Roth accounts in a 401(k) or 403(b) plan are not subject to lifetime RMDs while the account owner is alive under current law.
That distinction matters because “Roth” in one account type does not always behave the same way as “Roth” in another conversation people remember from years ago.
Beneficiaries are a different story
Even though Roth IRAs do not have lifetime RMDs for the original owner, beneficiaries can still be subject to distribution rules after the owner’s death. That is a related topic, but a different one.
When RMDs start
Here is the practical version.
For many current retirees, the IRS says RMDs generally begin at age 73. Later cohorts may have a later applicable age under current law, so this is one of those rules worth checking as retirement approaches rather than relying on old cocktail-party memory.
The first-year timing rule
Your first RMD is generally for the year in which you reach the applicable starting age. You can usually take that first RMD by December 31 of that year or delay it until April 1 of the following year.
That sounds harmless. Sometimes it is. Sometimes it is a tax trap wearing loafers.
The two-distribution-year trap
If you delay the first RMD until April 1 of the following year, you still have to take that second year’s RMD by December 31 of the same year.
That can mean two taxable distributions in one calendar year.
For some households that is manageable. For others it can create unnecessary tax pressure or Medicare-premium consequences.
Still-working exceptions
According to the IRS, participants in a workplace retirement plan may be able to delay RMDs until the year they retire if they are not a 5% owner of the business sponsoring the plan.
That exception generally does not apply to traditional IRAs, SEP IRAs, or SIMPLE IRAs. Those accounts follow their own timetable even if you are still working.
How RMDs are calculated
The basic calculation is straightforward, even if the planning is not.
In general, you divide the account balance as of December 31 of the prior year by the applicable life-expectancy factor from the IRS tables.
A simple example
Suppose your traditional IRA was worth $500,000 on December 31 of last year.
If the applicable IRS divisor for your age is 26.5, the RMD would be:
$500,000 ÷ 26.5 = about $18,868
That is the minimum amount that would need to come out for the year in this simplified example.
Which table applies
Most IRA owners use the IRS Uniform Lifetime Table.
If your spouse is your sole beneficiary and more than 10 years younger than you, a different table may apply. That can lower the required distribution.
Account-by-account issues
This is where people make confident mistakes.
Do not assume one account can always cover every RMD. Aggregation rules can differ by account type. Traditional IRAs, SEP IRAs, and SIMPLE IRAs often have more flexible aggregation rules than employer plans, while workplace-plan RMDs are often more account-specific.
The safe move is to verify the rule before treating all accounts as interchangeable.
What happens if you miss an RMD?
Missing an RMD is not ideal.
The IRS says the excise tax on a missed RMD is generally 25% of the amount not distributed as required, reduced to 10% if the shortfall is corrected within the applicable correction window.
That is better than the old regime, but it is still not the sort of penalty anyone should collect as a hobby.
How RMDs affect retirement planning
This is where the article gets more useful than a rule sheet.
Taxable income
RMDs generally add taxable income. That can push up the total tax cost of the year, especially when combined with Social Security, pensions, capital gains, or other distributions.
Medicare premiums
Higher income can affect Medicare premiums through IRMAA. A large pre-tax balance is not just a future tax story. It can also become a future healthcare-cost story.
If you have not looked at that interaction yet, read Medicare IRMAA Surcharges Explained.
Charitable planning
For charitably inclined households, qualified charitable distributions can be extremely useful. They do not eliminate the RMD requirement by magic, but they can allow eligible IRA owners to direct qualifying amounts to charity in a more tax-efficient way than taking the income and then writing a check.
Roth conversions before RMD age
One of the cleanest planning opportunities is often the period before RMDs begin. That is why Roth Conversion Strategies in Retirement belongs right next to this page. If large pre-tax balances are likely to produce uncomfortable RMDs later, earlier conversions may deserve a look.
Common RMD mistakes
Waiting too long to plan
The year RMDs begin is late in the game to discover you dislike the future tax picture. The best time to think about RMDs is often several years before they start.
Forgetting the first-year timing choice
Delaying the first RMD until April 1 of the next year may sound convenient, but it can also create the two-distribution-year problem.
Assuming Roth means no rules at all
Roth IRAs do not have lifetime RMDs for the original owner, but beneficiaries are still subject to distribution rules.
Treating RMDs as a tax-only problem
RMDs interact with cash flow, charitable planning, Medicare costs, and estate strategy. They belong in the comprehensive plan.
An RMD planning checklist for the years before they begin
Two or three years before RMD age, a household should know:
- the size of pre-tax retirement balances,
- the likely future RMD range,
- whether Roth conversions should be evaluated,
- whether charitable giving might be paired with future QCDs,
- how Social Security and pensions affect the tax picture,
- and whether Medicare-premium thresholds need to be considered.
That is much better than being “surprised” by a rule the government has been announcing for decades.
Frequently asked questions about RMDs
At what age do RMDs start?
For many current retirees, IRS guidance says RMDs generally begin at age 73. Later cohorts may have a later applicable age under current law, so it is worth checking the current rule as you get closer.
Do Roth IRAs have RMDs?
Not for the original owner during life. Beneficiaries can still be subject to distribution rules.
Can I take my RMD from one account?
Sometimes, depending on the type of account. Aggregation rules differ, so do not assume every retirement account can be handled the same way.
What happens if I miss an RMD?
The IRS says the excise tax is generally 25% of the amount not taken, reduced to 10% if corrected within the applicable correction window.
Are RMDs taxable?
Usually yes, except for any part that represents basis or amounts that are otherwise tax-free under the account rules.
Read these next
To round out the distribution and tax side of the retirement pillar, continue with:
- The FamilyVest Guide to Retirement & Distribution Planning
- Tax-Efficient Retirement Income Strategies
- Which Accounts Should You Spend First in Retirement?
- Roth Conversion Strategies in Retirement
- How to Build a Retirement Paycheck
Review Your RMD Plan Before the Calendar Makes the Decision for You
RMDs are not complicated because the formula is hard. They are complicated because they touch taxes, healthcare costs, charitable planning, and future flexibility all at once. If you want help seeing those moving parts together, that is the work. Explore our retirement planning approach or start a conversation.
