What an RMD Is
Tax-deferred retirement accounts cannot be deferred forever. From age 73, the IRS requires a minimum withdrawal each year, calculated from the balance on December 31 of the previous year divided by a life expectancy factor:
RMD = Prior year-end balance / Life expectancy factor
The factor comes from the IRS Uniform Lifetime Table. At 73 it is 26.5, which works out to 3.77% of the account. It falls with age, so the required percentage rises every year: about 5% at 80, 8.2% at 90.
The Table
| Age | Factor | Percent of balance |
|---|---|---|
| 73 | 26.5 | 3.77% |
| 75 | 24.6 | 4.07% |
| 80 | 20.2 | 4.95% |
| 85 | 16.0 | 6.25% |
| 90 | 12.2 | 8.20% |
| 95 | 8.9 | 11.24% |
| 100 | 6.4 | 15.63% |
A different table — Joint Life and Last Survivor — applies when the sole beneficiary is a spouse more than ten years younger, producing a larger factor and a smaller required withdrawal.
Which Accounts Are Affected
- Subject to RMDs: traditional IRAs, SEP and SIMPLE IRAs, 401(k), 403(b) and 457(b) plans.
- Not subject: Roth IRAs during the owner's lifetime, and since 2024, Roth 401(k) accounts.
- Still working exception: if you are employed past 73 and do not own 5% or more of the company, the workplace plan at that employer can be deferred until retirement. This never applies to IRAs.
Multiple IRAs are aggregated: compute the RMD for each, then take the total from any one or any combination. Employer plans are not aggregated — each 401(k) must satisfy its own.
The Penalty and the Deadlines
The first RMD may be delayed to April 1 of the year after you turn 73. Doing so means two distributions in the same tax year, which can push you into a higher bracket — usually a bad trade. Every subsequent RMD is due by December 31.
Missing one costs 25% of the shortfall under SECURE 2.0, down from the old 50%, and drops to 10% if corrected within two years and reported on Form 5329.
Reducing Future RMDs
- Roth conversions before 73 — the converted money never generates an RMD again. Low-income years between retirement and Social Security are the natural window.
- Qualified charitable distributions — from 70½ you can send up to $108,000 a year directly to a charity. It satisfies the RMD and never enters taxable income, which is better than donating after withdrawal.
- Draw down early — taking more than required in low-bracket years reduces the balance the factor is applied to later.
Frequently Asked Questions
What age do RMDs start?
73 for anyone reaching that age in 2023 or later. It rises to 75 in 2033 under SECURE 2.0.
Can I reinvest an RMD?
You must take it out of the retirement account, but nothing stops you putting it straight into a taxable brokerage account. It cannot be rolled into another retirement account.
Do RMDs apply to inherited accounts?
Yes, under different rules. Most non-spouse beneficiaries must empty an inherited IRA within ten years, and annual distributions are also required if the original owner had already begun taking RMDs.