What exactly is an RMD? When do I have to take it? Why do I have to take it? How is it calculated? And what happens if I forget? If these questions sound familiar, you’re not alone.
Whether this is your first RMD or you’ve been taking them for years, understanding how these withdrawals work—and why they exist—can help make year-end retirement planning less complicated.
What Are Required Minimum Distributions?
A Required Minimum Distribution is the annual amount the IRS requires you to withdraw from most tax-deferred retirement accounts once you reach a certain age.
RMDs apply to traditional IRAs, SEP and SIMPLE IRAs, and employer plans like 401(k)s and 403(b)s. Roth IRAs don’t require RMDs during your lifetime, but inherited Roth accounts do.
📌 If you’re wondering how RMDs fit into your broader retirement income, explore our IRA Planning page.
What is the Reason for RMDs?
When you contributed to your traditional IRA or workplace retirement plan, you received a tax break—you didn’t pay taxes on that money at the time, and the funds were given the opportunity to grow without being taxed.
RMDs are how the IRS makes sure tax-deferred money eventually becomes taxable. They also prevent retirement savings from sitting untouched for decades while continuing to grow tax-free.
⚠️ Important: If you’ve lost a spouse, your RMD rules may change. It depends on whether you inherit their account or move the assets into your own name.
When Do You Have to Start Taking RMDs?
Under current rules, the RMD starting age is 73. Your first RMD has a one-time timing option:
- Take it by December 31 of the year you turn 73, or
- Delay it until April 1 of the following year
Waiting until April 1 means you’ll take two RMDs in the same year—one by April 1 and one by December 31. This can increase your taxable income for that year and affect your tax bracket, how much of your Social Security is taxable, and your Medicare premiums.
Some people may choose to delay their first RMD if they expect their income to be lower the following year or prefer to keep the money invested a bit longer.
⚠️ Reminder: After your first year, every RMD is due by December 31.
📌 See how year-end RMD decisions connect with your broader goals on our Retirement Planning page.
Will the RMD Age Change Again?
Under current law (based on IRS rules as of 2025), the RMD age will rise again in 2033, and your birth year determines which age applies to you:
- Born 1951–1959: RMD age is 73
- Born 1960 or later: RMD age will increase to 75 beginning in 2033
These changes stem from the SECURE 2.0 Act, which updated several RMD rules and pushed the starting age to 73—and eventually 75.
Do You Have to Take RMDs If You’re Still Working?
If you’re still working past age 73, some employer-sponsored retirement plans allow you to delay RMDs until you retire. IRAs, however, never qualify for this exception.
⚠️ Important: If you own 5% or more of the company sponsoring the plan, you must start RMDs at the required age—even if you’re still working.
How Are Required Minimum Distributions Calculated and What RMD Rules Apply?
Your RMD is calculated based on:
- Your account balance on December 31 of the prior year
- Your age, which determines your IRS life-expectancy factor
- Your beneficiary situation (for example, a spouse more than 10 years younger)
Many custodians calculate the amount for you, but it’s still helpful to understand the general framework. Here’s a simple example using the IRS Uniform Lifetime Table (the table most retirees use):
Example (2025 RMD):
- Age: 73
- Prior year-end account balance (12/31/2024): $100,000
- IRS life-expectancy factor for age 73: 26.5
Step 1 — Identify your prior year balance:
$100,000
Step 2 — Divide by your life-expectancy factor:
$100,000 ÷ 26.5 = $3,773.58
Result:
For 2025, a 73-year-old with a $100,000 prior-year IRA balance would need to withdraw $3,773.58 as their Required Minimum Distribution.
A few rules to keep in mind:
- IRAs: You may calculate them separately and withdraw the total from one or more IRAs.
- 401(k)s, 457(b)s, and most employer plans: Each plan must satisfy its own RMD.
- Inherited IRAs: Follow different rules, especially under the 10-year payout schedule.
💡 Tip: One common RMD mistake is assuming RMDs from different account types can be combined. IRAs can be aggregated, but workplace plans like 401(k)s cannot.
❓Do RMDs get bigger over time?
Because the IRS life-expectancy factor decreases as you age, your required withdrawal might increase each year—regardless of your account balance.
What is the Biggest RMD Mistake?
Because Required Minimum Distributions rules differ across IRAs, 401(k)s, inherited accounts, and employer plans, mistakes can happen — especially if you’ve changed jobs, opened multiple accounts over time, or manage both personal and inherited assets.
💡 Tip: One common RMD mistake is overlooking an old IRA or 401(k). Even one missed account can trigger a penalty if the RMD isn’t taken on time.
Other RMD mistakes can include:
- Combining the wrong RMDs. IRAs can be aggregated, but workplace plans like 401(k)s and 457(b)s must each satisfy their own RMD.
- Forgetting inherited accounts. Inherited IRAs follow different rules, especially under the 10-year payout schedule.
- Waiting too late in the year. December bottlenecks can lead to calculation delays, paperwork issues, or missed deadlines.
- Using the wrong RMD age. Some people still follow the old 70½ or 72 rules and start withdrawals earlier than required, which can increase taxable income sooner than necessary.
📌 Read our blog – Avoiding Common RMD Mistakes
What Should You Do If You Miss a Required Minimum Distribution?
Missing an RMD or withdrawing too little can result in an IRS penalty:
- Up to 25% of the amount not taken
- Reduced to 10% if corrected within the required timeframe
If you miss an RMD, you generally need to withdraw the amount, file IRS Form 5329, and include a brief explanation if you are asking for a reduced penalty.
❓ Does taking out more than your RMD count towards next year?
No — even if you withdraw extra, it doesn’t reduce what you’ll have to take next year. RMDs reset annually.
📌 Read our blog – What to Do If You Miss a Required Minimum Distribution (RMD)
How RMDs Affect Taxes, Social Security, and Medicare
RMDs usually count as ordinary income, which means they can influence several parts of your tax and retirement picture.
💡 Tip: You can choose to have taxes withheld directly from your RMD, which you might find easier than making separate estimated payments.
RMD income can affect:
- Your income-tax bracket: A larger RMD can push you into a higher bracket for the year.
- How much of your Social Security is taxable: More income can increase the portion of your Social Security benefit that gets taxed.
- Medicare IRMAA surcharges: Higher income can trigger additional Medicare premiums in future years.
- Whether you need estimated tax payments: Some retirees prefer to withhold taxes from their RMD instead of sending separate quarterly payments.
Since RMD income can influence several parts of your tax picture, many retirees revisit their RMD tax planning each year—especially once Social Security or Medicare premiums become part of the equation.
📌 See how Tax Planning fits into your broader retirement strategy.
Can You Reinvest Your Required Minimum Distribution?
If you don’t need your RMD for day-to-day spending, you can choose to reinvest it in a regular taxable account. You can also use your RMD for future expenses, family support, or charitable giving.
❓ Can I put my RMD into a Roth?
You can’t move an RMD directly into a Roth IRA — the IRS doesn’t allow RMD dollars to be converted or rolled over.
💡 Tip: If charitable giving is part of your plans, you may want to explore Qualified Charitable Distributions (QCDs). IRA owners age 70½ or older can send money directly to an eligible charity, and the amount given can count toward their RMD for the year, up to the annual IRS limit.
📌 Read our blog – Year-End Giving 2025: Ways to Make Your Charitable Donations Count.
How RMDs Fit into Your Ongoing Retirement Plan
RMDs aren’t just something to check off before December 31 — they’re part of how you manage your income throughout retirement. As your tax bracket, Social Security timing, healthcare costs, or account balances change, it can be helpful to revisit how these withdrawals fit into your broader retirement plan.
If you’d like help understanding your RMD, coordinating withdrawals across accounts, or thinking ahead for future tax years, schedule a complimentary introductory meeting with our team in Glastonbury or Wilton, Connecticut.
Jordan Hickey is a CERTIFIED FINANCIAL PLANNER® professional who helps clients create personalized financial plans. Based in Glastonbury and Wilton, CT, Jordan offers guidance on retirement, insurance, investments, and overall wealth management. Schedule a complimentary introductory meeting with Jordan.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, and it is not a statement of all available data necessary for making an investment decision. Any opinions are those of the author, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice.
RMDs are generally subject to federal income tax and may be subject to state taxes. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.