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Take your traditional IRA balance. Divide by 26.5 if you're 73. That's your Required Minimum Distribution—the amount you must withdraw this year or face penalties.
Sounds simple until you realize you have three traditional IRAs at different institutions, a rollover IRA from your old 401(k), a SEP-IRA from consulting work, and your 403(b) still at your former employer. Now you're calculating six different Required Minimum Distributions, aggregating some but not others, withdrawing from the right accounts using the correct combinations, and tracking whether you met the total requirement across all accounts.
Most retirees discover RMD rules complexity the hard way. The brokerage firm calculates an RMD for the IRA they hold—but they don't know about your other IRAs. You take their calculated amount, assuming you're compliant. Meanwhile, your other two IRAs also had requirements you never calculated. By April you receive an IRS notice proposing a $7,500 penalty for the shortfall you didn't know existed.
Understanding the key rules help you know when to start withdrawing from retirement accounts regardless of whether you need the money, how much you must withdraw annually to avoid penalties, and which accounts require RMDs and which are exempt. Getting them wrong can cost you 25% of the shortfall immediately, plus income taxes on corrective distributions.
Here's everything you need to know about Required Minimum Distributions:
What are Required Minimum Distributions?
Required Minimum Distributions (RMDs) are the minimum amounts you must withdraw annually from tax-deferred retirement accounts once you reach a certain age. The IRS requires RMDs to ensure the government eventually collects income tax on money that grew tax-deferred for decades.
Why RMDs exist
Traditional IRAs, 401(k)s, 403(b)s, and similar accounts allowed you to defer taxes on contributions and earnings for years or decades. Without RMD rules, you could let these accounts grow tax-deferred forever and pass them to heirs who could continue deferring taxes indefinitely. RMDs force account owners to begin withdrawing—and paying taxes on—a portion of their tax-deferred savings each year.
Accounts subject to RMDs
Traditional IRAs, SEP-IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) governmental plans, TSP (Thrift Savings Plan), and inherited IRAs (under specific rules) all require RMDs.
Accounts exempt from RMDs
Roth IRAs do not require RMDs during the original owner's lifetime—you can let the account grow tax-free indefinitely without ever taking distributions.?
New Update: Roth 401(k)s and Roth 403(b)s no longer require RMDs starting in 2024, per SECURE 2.0. Previously, Roth 401(k) and Roth 403(b) account holders were required to take RMDs during their lifetime (though they could avoid this by rolling to a Roth IRA). Beginning in 2024, designated Roth accounts in employer retirement plans are completely exempt from RMD requirements during the owner's lifetime, aligning them with Roth IRA treatment.?
This means if you have a Roth 401(k) or Roth 403(b):
- For RMDs due in 2024 and later: Your Roth account balance is excluded from RMD calculations entirely?
- You no longer need to roll to a Roth IRA to avoid RMDs—you can keep funds in the employer plan RMD-free?
- Pre-tax portions of your 401(k) or 403(b) still require RMDs as usual?
Example: You have a 401(k) with $300,000 in pre-tax contributions and $150,000 in a designated Roth 401(k) account. For 2025 RMD calculations, only the $300,000 pre-tax balance is subject to RMDs—the $150,000 Roth portion is completely exempt.
When you must start taking RMDs: The age requirement for 2025
Your Minimum Required Distribution starting age depends entirely on your birth year due to changes from the SECURE Act (2019) and SECURE 2.0 Act (2022).
RMD starting ages by birth year
- Born before July 1, 1949: RMDs began at age 70½ (you've already been taking RMDs for years)
- Born July 1, 1949 through December 31, 1950: RMDs begin at age 72
- Born January 1, 1951 through December 31, 1959: RMDs begin at age 73
- Born January 1, 1960 or later: RMDs begin at age 75
For the 2025 tax year, if you were born between January 1, 1951 and December 31, 1952 and turn 73 during 2025, you must take your first Required Minimum Distribution.
First-year RMD timing exception
Your first Minimum Required Distribution can be delayed until April 1 of the year following the year you reach your RMD age. However, this creates a problem—you'll be required to take two RMDs in that second year (one for the prior year by April 1, and one for the current year by December 31).
Example: You turn 73 on March 15, 2025. Your first Required Minimum Distribution is for the 2025 tax year, but you have until April 1, 2026 to take it. If you delay, you must take both your 2025 RMD (by April 1, 2026) and your 2026 RMD (by December 31, 2026) in the same calendar year, potentially pushing you into a higher tax bracket.
Tax planning tip: Most advisors recommend taking your first Minimum Required Distribution by December 31 of the year you turn your RMD age to avoid doubling up distributions the following year.
All subsequent RMDs: December 31 deadline
After your first RMD, you must take each year's Minimum Required Distribution by December 31. No extensions or delays exist except in rare disaster relief situations.
How to calculate your RMD amount
RMD calculator tools and methods follow a straightforward formula, but you must use the correct account balance and life expectancy factor.
The basic RMD formula
RMD Calculator formula: December 31 account balance (prior year) ÷ Life expectancy factor
Example: Your traditional IRA balance on December 31, 2024 was $520,000. You turn 75 in 2025. Using the Uniform Lifetime Table, your life expectancy factor at age 75 is 24.6.
RMD calculator result: $520,000 ÷ 24.6 = $21,138
You must withdraw at least $21,138 from your traditional IRA by December 31, 2025. You can withdraw more (the excess doesn't count toward future years), but withdrawing less triggers penalties.
Which account balance to use
Use the account balance as of December 31 of the prior year—not the current year, not the average balance, not the balance on your birthday. If you're calculating your 2025 Minimum Required Distribution, use your December 31, 2024 balance exactly as reported on your year-end account statement.
For multiple IRAs, calculate the Required Minimum Distribution for each IRA separately using each account's December 31 balance, then you can aggregate the total and withdraw from one or more IRAs in any combination totaling at least the combined RMD.
For 401(k)s and other employer plans, you must calculate and withdraw the RMD separately from each plan—you cannot aggregate like you can with IRAs.
IRS life expectancy tables
Most IRA owners use the Uniform Lifetime Table, which assumes a beneficiary is exactly 10 years younger than the account owner. This table applies to unmarried individuals, married individuals whose spouse is not the sole beneficiary, or married individuals whose spouse is not more than 10 years younger.
If your sole beneficiary is your spouse who is more than 10 years younger, use the Joint Life and Last Survivor Expectancy Table, which provides longer life expectancies and smaller required distributions.
Uniform Lifetime Table (selected ages for 2025)
|
Age |
Life Expectancy Factor |
Age |
Life Expectancy Factor |
|
73 |
26.5 |
80 |
20.2 |
|
74 |
25.5 |
81 |
19.4 |
|
75 |
24.6 |
82 |
18.5 |
|
76 |
23.7 |
83 |
17.7 |
|
77 |
22.9 |
84 |
16.8 |
|
78 |
22.0 |
85 |
16.0 |
|
79 |
21.1 |
90 |
12.2 |
The factor decreases each year, meaning your Required Minimum Distribution percentage increases annually even if your account balance stays flat.
The RMD penalty: What happens when you miss or underpay
The IRS imposes harsh penalties for failing to take your full Minimum Required Distribution—among the steepest penalties in the tax code.
Current penalty structure (SECURE 2.0 changes)
Under the SECURE 2.0 Act effective for missed RMDs beginning in 2023, the penalty was reduced from 50% to 25% of the amount you failed to withdraw.
Further reduction: If you correct the missed Required Minimum Distribution and file Form 5329 by the due date of your tax return for the second year following the year of the missed RMD, the penalty reduces to 10%.
Example: Your 2025 RMD is $30,000 but you only withdrew $18,000. You missed $12,000. The base penalty is $3,000 (25% of $12,000). If you immediately withdraw the missing $12,000 in 2026 and file Form 5329 by the due date of your 2027 tax return (filed in 2028), the penalty reduces to $1,200 (10% of $12,000).
How to correct missed RMDs
Withdraw the shortage amount immediately—the faster you correct, the better your case for penalty reduction. File Form 5329 (Additional Taxes on Qualified Plans and Other Tax-Favored Accounts) for each year you missed an RMD. Attach a statement explaining the reasonable cause for missing the RMD. Request waiver of the penalty showing steps taken to remedy the situation.
The IRS often waives or reduces the penalty if you can show reasonable cause (relied on incorrect advice, financial institution error, serious illness) and you corrected the shortage promptly.
Strategies to minimize taxes on RMDs
RMD rules force taxable distributions whether you need the money or not. Smart planning reduces the tax impact.
Strategy 1: Qualified Charitable Distributions (QCDs)
If you're 70½ or older, you can direct up to $108,000 annually (indexed for inflation, increased from $105,000 in 2024) directly from your IRA to qualified charities. QCDs count toward your Minimum Required Distribution but are excluded from taxable income entirely—they don't appear on your Form 1040.?
Benefits: Satisfies RMD requirement without increasing adjusted gross income, avoids phasing out deductions and credits tied to AGI, keeps you below Social Security taxation thresholds and Medicare IRMAA surcharges, and provides charitable benefit without needing to itemize deductions.?
Example: Your RMD is $25,000. You direct $15,000 to your church via QCD and withdraw $10,000 for living expenses. Only $10,000 is taxable income—you satisfied your $25,000 RMD but reduced taxable income by $15,000.?
Strategy 2: Strategic Roth conversions before RMD age
Convert traditional IRA funds to Roth IRA before you reach RMD age. You pay tax on the conversion amount now, but those converted funds never face RMDs and grow tax-free forever.?
Example: You're 68 with a $600,000 traditional IRA. You convert $100,000 annually for five years before age 73. You pay tax on $500,000 over five years at controlled rates. At age 73, your remaining traditional IRA balance is only $200,000 (plus growth), generating much smaller Required Minimum Distributions and leaving $500,000 (plus growth) in your Roth IRA with no RMD requirements.?
Strategy 3: The "Still Working Exception" — RMD Delay for 401(k) Participants
If you're still employed after reaching RMD age, you may be able to delay RMDs from your current employer's 401(k) plan until you actually retire. This powerful exception does not apply to IRAs—only to 401(k), 403(b), and governmental 457(b) plans sponsored by your current employer.?
Who qualifies for the still working exception:
- You must be actively employed by the company sponsoring the plan (even part-time employment qualifies)?
- You cannot own more than 5% of the company?
- The plan document must specifically allow the still working exception—not all plans do?
- You must remain employed throughout the entire calendar year (retiring on December 31 disqualifies you for that year)?
What the exception covers:
- Delays RMDs from your current employer's 401(k) until April 1 of the year following the year you retire?
- Does NOT apply to IRAs or 401(k)s from former employers—you must still take RMDs from those accounts?
- No minimum work hours required—as long as your employer considers you employed, you qualify?
Action steps to use the still working exception:
- Verify your ownership percentage—if you own more than 5% of the company, you don't qualify?
- Review your plan's Summary Plan Description (SPD) or contact HR to confirm the plan allows the still working exception?
- Notify your plan administrator that you're still employed and wish to delay RMDs?
- Continue taking RMDs from IRAs and old 401(k)s—the exception only applies to your current employer's plan?
- Plan for the year you retire—your first RMD will be due by April 1 of the following year, and you may face two RMDs in one calendar year?
How the Still Working Exception Impacts Social Security Taxation
The still working exception creates strategic opportunities to minimize lifetime taxes, especially when coordinated with Social Security claiming decisions.?
Social Security benefits become taxable when your "combined income" exceeds certain thresholds:?
- Combined income = Adjusted Gross Income + Nontaxable Interest + ½ of Social Security Benefits
- Thresholds for taxation:
- Single: $25,000-$34,000 (up to 50% taxable); over $34,000 (up to 85% taxable)
- Married filing jointly: $32,000-$44,000 (up to 50% taxable); over $44,000 (up to 85% taxable)
The RMD-Social Security double taxation trap:
When you delay Social Security until age 70 to maximize benefits (earning 8% annual increases from age 67-70), you receive larger monthly checks. But if you also face RMDs starting at age 73-75, the combination creates a "perfect storm":?
- Large RMDs increase your AGI
- Higher AGI pushes more of your Social Security benefits into taxable territory
- You may end up with 85% of your larger Social Security benefit taxable, plus the full RMD amount?
How the still working exception helps:
By continuing to work part-time and delaying 401(k) RMDs, you can:
Reduce taxable income in early retirement years (age 73-retirement): No 401(k) RMDs means lower AGI, keeping more Social Security benefits tax-free or reducing the taxable percentage?
- Create Roth conversion opportunities: Lower income during the working years (when 401(k) RMDs are delayed) provides an ideal window for Roth conversions at lower tax brackets. Convert traditional IRA funds to Roth while you're still working and delaying 401(k) RMDs, paying tax at potentially lower rates.?
- Minimize future RMD impact: By converting IRAs to Roth during the delay period, you reduce future RMD amounts once you retire, keeping AGI lower and minimizing Social Security taxation long-term.?
Tax planning considerations:
- Coordinate work continuation with Social Security timing: If you're going to work past RMD age anyway, delay Social Security to maximize the benefit increase?
- Use the low-income window for conversions: The years when you delay 401(k) RMDs provide ideal Roth conversion opportunities?
- Don't forget state taxes: Some states don't tax Social Security benefits or have different rules—factor this into planning?
- Plan for Medicare IRMAA: High combined income (RMDs + Social Security) can trigger Medicare premium surcharges based on income from two years prior?
Strategy 4: Reinvest RMDs you don't need
If you don't need RMD funds for living expenses, immediately reinvest in taxable brokerage accounts. You cannot put RMDs back into retirement accounts (that would violate the purpose of RMDs), but you can invest in stocks, bonds, mutual funds, or ETFs in regular accounts. Future growth is taxed at capital gains rates (typically lower than ordinary income rates on IRA distributions).?
Strategy 5: Time other income around large RMDs
Delay Social Security claiming if you expect large Minimum Required Distributions, as RMDs increase provisional income potentially making 85% of Social Security taxable. Avoid Roth conversions in years with unusually large RMDs to prevent stacking taxable income. Time capital gains realizations to avoid years with large RMDs pushing you into higher brackets
RMDs for multiple retirement accounts
Different account types have different aggregation and withdrawal rules under RMD rules.
Traditional IRAs: Calculate separately, withdraw from any
Calculate the RMD for each traditional IRA, SEP-IRA, and SIMPLE IRA separately. Add all the RMD amounts together. Withdraw the total from one IRA, multiple IRAs, or all IRAs in any combination you choose.
Example: You have three traditional IRAs with RMDs of $8,000, $12,000, and $5,000 (total $25,000). You can withdraw the entire $25,000 from one IRA, split it across two IRAs, or take proportional amounts from all three—the choice is yours as long as the total meets $25,000.
401(k)s and employer plans: Calculate and withdraw separately
Calculate the RMD separately for each 401(k), 403(b), or other employer plan. You must withdraw each plan's RMD from that specific plan—no aggregation allowed.
Example: You have two 401(k)s from former employers with RMDs of $15,000 and $9,000. You must withdraw at least $15,000 from the first 401(k) and at least $9,000 from the second 401(k)—you cannot combine them and withdraw $24,000 from just one plan.
403(b) plans: Special aggregation rule
403(b) plans can be aggregated similar to IRAs—calculate separately but withdraw the total from one or more 403(b) plans. However, 403(b) plans cannot be aggregated with IRAs or 401(k)s.
Inherited IRA RMD rules under SECURE Act
If you inherited an IRA, different RMD rules apply depending on your relationship to the deceased and the year of death. An Inherited IRA RMD calculator helps beneficiaries determine required distributions.
Eligible designated beneficiaries (EDBs)
Surviving spouses, minor children (until age of majority), disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than the deceased can stretch RMDs over their life expectancy using the Single Life Expectancy Table. An Inherited IRA RMD calculator helps these beneficiaries determine annual required amounts.
Non-eligible designated beneficiaries (10-year rule)
Most adult children and other non-spouse beneficiaries must empty the inherited IRA within 10 years of the owner's death. If the original owner died after their RMD beginning date, the IRS recently clarified that annual RMDs are required during the 10-year period (not just a full withdrawal by year 10). An Inherited IRA RMD calculator can help navigate these complex requirements.
This area remains complex and IRS guidance has shifted—consult with a tax professional for inherited IRA situations. Using a reliable Inherited IRA RMD calculator ensures accuracy for beneficiary distributions.
Common RMD mistakes that cost money
Taking RMDs from the wrong account type
Some retirees mistakenly take distributions from Roth IRAs or Roth 401(k)s thinking they satisfy traditional IRA Required Minimum Distribution requirements. Roth IRA distributions during your lifetime never satisfy traditional IRA RMDs—you must withdraw from the traditional IRA itself (or another traditional IRA).
Roth 401(k)s do have their own RMD requirements, but those RMDs cannot satisfy traditional IRA or traditional 401(k) RMDs.
Calculating RMD based on current year-end balance
The RMD calculator formula always uses the prior year's December 31 balance. Using the current year balance, an average balance, or your birthday balance results in incorrect calculations.
Missing the first-year April 1 deadline
If you delay your first Minimum Required Distribution until April 1 of the following year, that date is a hard deadline—no extensions. Missing it means you missed the prior year's RMD entirely, triggering the 25% penalty.
Assuming custodians calculate RMDs correctly
Many IRA custodians provide RMD calculator estimates as a courtesy, but they're not always accurate—especially if you have multiple IRAs at different institutions. The custodian at Bank A doesn't know about your IRAs at Bank B and Bank C. You remain responsible for calculating the correct total RMD across all accounts.
Not coordinating RMDs with tax planning
Taking your entire Minimum Required Distribution in one lump sum in December can push you into higher tax brackets, trigger Medicare IRMAA surcharges, or phase out deductions. Monthly or quarterly distributions spread the income across the year and may reduce overall tax impact.
Using an RMD calculator for accuracy
A reliable RMD calculator helps you determine exact withdrawal amounts. The best RMD calculator tools account for multiple accounts, correct life expectancy factors, and prior-year December 31 balances. Many financial institutions offer RMD calculator tools, but remember they only calculate for accounts held at that institution.
For inherited IRAs, specialized Inherited IRA RMD calculator tools help beneficiaries navigate complex distribution requirements under current RMD rules. An accurate Inherited IRA RMD calculator considers the beneficiary's relationship to the deceased, year of death, and whether the original owner had reached their RMD beginning date.
Professional RMD calculator tools used by tax advisors often provide more comprehensive analysis across all your retirement accounts, ensuring compliance with all RMD rules while optimizing tax efficiency.
How NSKT Global can help with RMD planning and compliance
NSKT Global provides comprehensive Required Minimum Distribution planning ensuring you meet IRS requirements while minimizing lifetime taxes on forced retirement account distributions.
We offer RMD calculation and compliance services including accurate Required Minimum Distribution calculations across all traditional IRAs and employer plans using correct prior-year balances and life expectancy factors, multi-account coordination calculating total RMDs when you have IRAs at multiple institutions, deadline tracking ensuring timely withdrawals by December 31 (or April 1 for first-year RMDs), beneficiary-specific RMD calculations for inherited IRAs under current SECURE Act RMD rules, and Form 5329 preparation when RMDs are missed with penalty relief requests.
Our RMD tax planning strategies include Qualified Charitable Distribution (QCD) implementation directing RMDs to charity tax-free for clients 70½ and older, pre-RMD Roth conversion planning converting traditional IRA funds to Roth before RMDs begin to reduce future Minimum Required Distribution amounts, RMD reinvestment strategies for clients who don't need distributions for living expenses, tax bracket management timing RMDs and other income to minimize marginal tax rates, and Social Security coordination planning RMD timing around Social Security claiming to minimize combined taxation.
Whether you're approaching your first RMD year, managing annual RMDs across multiple accounts, or planning strategies to reduce lifetime RMD taxes, our retirement distribution expertise ensures you satisfy IRS requirements, avoid costly penalties, minimize taxes on forced distributions, and coordinate Required Minimum Distributions with your broader retirement and tax planning strategy.
