What Are Required Minimum Distributions (RMDs)?
Required Minimum Distributions (RMDs) are mandatory annual withdrawals the IRS requires from traditional IRAs, 401(k)s, and most other tax-deferred retirement accounts beginning at age 73. The government deferred taxes on these accounts for decades — RMDs are how it collects. Failing to take your RMD on time triggers a 25% excise tax on the missed amount.
Which Accounts Are Subject to RMDs?
Subject to RMDs
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k) plans
- 403(b) plans
- 457(b) plans
- Inherited Roth IRAs (non-spouse beneficiaries)
NOT Subject to RMDs
- Roth IRAs (owner's lifetime)
- Roth 401(k)s (after 2024, SECURE 2.0)
- Current employer 401(k) if still working and under 5% owner
- Health Savings Accounts (HSAs)
How RMDs Are Calculated
Your RMD is calculated by dividing your account balance as of December 31 of the prior year by a life expectancy factor from the IRS Uniform Lifetime Table. The factor decreases each year, meaning a larger percentage of your account must be withdrawn as you age.
| Age | IRS Life Expectancy Factor | RMD on $500,000 Balance |
|---|---|---|
| 73 | 26.5 | $18,868 |
| 75 | 24.6 | $20,325 |
| 80 | 20.2 | $24,752 |
| 85 | 16.0 | $31,250 |
| 90 | 12.2 | $40,984 |
Example uses IRS Uniform Lifetime Table (2022 update). Actual RMD depends on prior year-end balance. If your spouse is the sole beneficiary and more than 10 years younger, a different table applies.
Strategies to Reduce RMDs
RMDs are taxable income — they can push you into a higher bracket, increase Medicare premiums (IRMAA), and make more of your Social Security taxable. Planning ahead can significantly reduce the impact.
Roth Conversions Before Age 73
Converting traditional IRA funds to a Roth IRA in your 60s reduces the balance subject to RMDs. Roth IRAs have no RMDs during the owner's lifetime, and the converted funds grow tax-free.
Qualified Charitable Distributions (QCDs)
If you are 70½ or older, you can donate up to $105,000 per year directly from your IRA to a qualified charity. The QCD satisfies your RMD but is excluded from your taxable income — unlike a regular withdrawal followed by a charitable deduction.
Strategic Early Withdrawals
Taking IRA withdrawals in your 60s — before RMDs begin — at lower tax rates reduces the account balance and future RMD amounts. This is especially effective in years when your income is lower than it will be in retirement.
Still Working Exception
If you are still working at age 73 and do not own more than 5% of the company, you may be able to delay RMDs from your current employer's 401(k) until you retire. This exception does not apply to IRAs or old 401(k)s from previous employers.
RMDs and Southeast Texas Retirees
Many Southeast Texas retirees — particularly those who worked in refining, petrochemicals, or healthcare — accumulated significant 401(k) and IRA balances over long careers. When RMDs begin at 73, those mandatory withdrawals can push taxable income well above what was anticipated, triggering IRMAA Medicare surcharges and increasing the taxable portion of Social Security.
The window between retirement (often age 60–65) and RMD age (73) is the most important planning period. Strategic Roth conversions and IRA withdrawals during those years can dramatically reduce lifetime taxes. Richard Placette II works with Southeast Texas retirees to build a coordinated withdrawal strategy that minimizes RMD impact.
Frequently Asked Questions
What is a Required Minimum Distribution (RMD)?
An RMD is the minimum amount the IRS requires you to withdraw each year from traditional IRAs, 401(k)s, and most other tax-deferred retirement accounts once you reach age 73. The government deferred taxes on these accounts for decades — RMDs are how it collects.
When do RMDs start?
Under SECURE 2.0, RMDs begin at age 73 for anyone born between 1951 and 1959, and at age 75 for anyone born in 1960 or later. Your first RMD can be delayed until April 1 of the following year, but delaying means taking two RMDs in one year.
How is an RMD calculated?
Divide your account balance as of December 31 of the prior year by the IRS life expectancy factor for your age. At 73, the factor is 26.5 — so a $500,000 IRA produces an RMD of approximately $18,868. The factor decreases each year, so a larger percentage must be withdrawn as you age.
What happens if I miss an RMD?
Missing an RMD triggers a 25% excise tax on the amount you should have withdrawn (reduced to 10% if corrected within two years). Take the missed distribution as soon as possible and file IRS Form 5329 to request a penalty waiver.
Can I reduce my RMDs?
Yes. Roth conversions before age 73 reduce the balance subject to RMDs. Qualified Charitable Distributions (QCDs) allow you to satisfy up to $105,000 of your RMD by donating directly to charity — excluded from taxable income. Strategic IRA withdrawals in your 60s also reduce the balance before RMDs begin.
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Concerned About RMDs in Retirement?
Richard Placette II helps Southeast Texas retirees build a coordinated withdrawal strategy — minimizing RMD taxes, IRMAA surcharges, and Social Security taxation. Free consultation.
About the Author: Richard Placette II is a licensed financial advisor with MRB Capital Group in Lumberton, Texas. Verifiable on FINRA BrokerCheck and SEC IAPD. This content is for informational purposes only and does not constitute investment or tax advice.