Understanding Required Minimum Distributions: Rules and Deadlines

A Required Minimum Distribution (often called an RMD) is the minimum amount the Internal Revenue Service requires you to withdraw each year from your tax-deferred retirement accounts once you reach age 73. When you contributed to traditional retirement accounts during your working years, your money grew tax-deferred. Under federal tax law, you cannot keep those funds sheltered indefinitely. The government requires annual withdrawals so taxes are finally paid on those savings. Withdrawing the correct amount on time keeps your retirement plans on schedule and prevents expensive tax penalties.

What Are Required Minimum Distributions and Which Accounts Require Them?

The rules governing required minimum distributions apply to most tax-deferred retirement accounts. According to the Internal Revenue Service required minimum distributions guide, RMD rules apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit-sharing plans, and other defined contribution plans.

If you hold a Roth IRA, you do not have to take RMDs while you are alive. The IRS confirms that original account owners are not required to take withdrawals from Roth IRAs or from designated Roth accounts in a 401(k) or 403(b) plan during their lifetime. Because you already paid taxes on Roth contributions, those funds continue growing tax-free. However, beneficiaries who inherit a Roth IRA or designated Roth workplace account remain subject to distribution rules.

When you withdraw an RMD from a traditional account, the distribution is included in your taxable income for that year, except for any portion representing previously taxed basis. These withdrawals increase your adjusted gross income, which can affect your tax bracket and how your benefits are taxed. Reviewing these effects is helpful when learning how to decide when to claim Social Security.

When RMDs Begin and the Deadlines You Need to Meet

You must begin taking required minimum distributions once you reach age 73. Managing your withdrawals requires tracking two essential deadlines.

Your first RMD comes with a one-time extension. Under IRS rules, the required beginning date for your first withdrawal is April 1 of the year following the calendar year in which you reach age 73.

For each year after your required beginning date, you must withdraw your RMD by December 31. If you postpone your first distribution until April 1 of the following year, you must take two required distributions in that same calendar year: the first by April 1, and the second by December 31. Taking two distributions in one year bunches taxable income together, which may push you into a higher tax bracket. Many retirees take their first distribution by December 31 of the year they reach 73 to spread taxable income evenly across both years.

If you continue working past age 73, you may be able to delay distributions from your current employer plan. The IRS retirement plan distribution FAQs explain that participants in a workplace plan, such as a 401(k) or profit-sharing plan, can delay taking their RMDs until the year they retire, unless they're a 5% owner of the business sponsoring the plan. This delay never applies to traditional IRAs, which always require withdrawals starting at 73.

How to Calculate Your RMD Using IRS Tables and Worksheets

Calculating your annual required distribution is a straightforward mathematical process. For each account, you take your account balance as of December 31 of the prior calendar year and divide it by a distribution period from IRS life expectancy tables.

Most retirees use the IRS Uniform Lifetime Table (Table III), published in IRS Publication 590-B. This table applies to unmarried owners, married owners whose spouses are not more than 10 years younger, and married owners whose spouses are not the sole beneficiaries of their accounts.

Here is how the Uniform Lifetime Table factors look for key retirement ages:

Age on Birthday That Year	IRS Life Expectancy Factor (Table III)
Age 73	26.5
Age 74	25.5
Age 75	24.6
Age 76	23.7
Age 77	22.9
Age 78	22.0

To see how the calculation works, consider an official example from IRS Publication 590-B. In this example, an IRA owner had an account balance of $100,000 at the end of the previous year and turned age 75 during the distribution year, with a spouse six years younger. Using Table III, the applicable denominator for age 75 is 24.6. Dividing the $100,000 balance by 24.6 results in a required minimum distribution of $4,065.

If your spouse is your sole beneficiary and is more than 10 years younger than you, you use Table II (Joint Life and Last Survivor Expectancy) instead, which provides a larger factor and lowers your annual distribution.

You must calculate your RMD separately for each traditional IRA you own, following the instructions on the IRS IRA Required Minimum Distribution Worksheet. Under IRS rules, once you determine a separate required minimum distribution from each of your traditional IRAs, you can total these minimum amounts and take them from any one or more of your traditional IRAs.

Workplace retirement plans follow stricter rules. If you hold multiple workplace accounts, such as two 401(k) plans, you cannot combine their required distributions. You must calculate and withdraw the RMD separately from each workplace plan account. To estimate your withdrawals across different accounts, you can use the free online Investor.gov Required Minimum Distribution Calculator provided by the Securities and Exchange Commission.

Penalties for Missing an RMD and How to Request a Waiver

Because required distributions are established by federal law, failing to withdraw the correct amount on time triggers steep penalties.

Under IRS rules, if you don't take any distributions, or if the distributions are not large enough, you may have to pay a 25% excise tax on the amount not distributed as required (10% if withdrawn within 2 years). To report this excise tax, you must file IRS Form 5329 with your federal tax return, as described on the IRS About Form 5329 information page.

Fortunately, the IRS provides relief if a missed withdrawal was an honest oversight. The IRS notes that the penalty may be waived if the account owner establishes that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. To request this relief, withdraw the full shortfall amount immediately. Then file Form 5329 with your tax return and attach a letter of explanation detailing the reasonable error and showing you took corrective action.

Practical Next Steps for Managing Your Annual Withdrawals

Managing required distributions step by step helps you stay compliant and avoid unexpected tax bills:

1. List every retirement account you own: Write down all your traditional IRAs, SEP IRAs, SIMPLE IRAs, and employer plans like 401(k) accounts. Note any Roth accounts, which require no lifetime distributions.
2. Locate prior year-end balances: Gather your statements showing the balance of each account as of December 31 of the previous year.
3. Determine your distribution factor: Look up your age on your birthday in the current year using Table III from IRS Publication 590-B.
4. Calculate your required withdrawal: Divide each account balance by your factor using the IRS worksheet, or confirm the amount with your account custodian.
5. Set up automatic withdrawals: Most financial institutions allow you to schedule automatic annual or monthly distributions directly to your checking account, ensuring you never miss the December 31 deadline.
6. Plan for income tax withholding: Remember that RMDs count as ordinary taxable income. Setting aside money for taxes makes building a simple retirement budget much easier throughout retirement.
7. Call the IRS for assistance if needed: If you have questions about your tax obligations or filing Form 5329, you can contact the IRS for telephone assistance at 800-829-1040 Monday through Friday between 7 a.m. to 7 p.m. local time.