Retirement Accounts
Required Minimum Distributions

Required Minimum Distributions, usually called RMDs, are the government’s way of making sure that retirement accounts do not remain tax-deferred forever.

Many people spend years contributing to IRAs, 401(k)s, 403(b)s, and other retirement accounts. In many cases, contributions were deducted from taxable income, and the investments grew without being taxed each year. That tax deferral is valuable, but it does not last indefinitely. At some point, the IRS requires the account owner, or later the beneficiary, to begin taking money out.

The concept sounds simple: calculate the required amount, withdraw it by the deadline, and report the taxable income. In practice, RMDs can become surprisingly complicated. The rules depend on the type of account, the age of the account owner, whether the owner is still working, who the beneficiary is, whether the account was inherited, and whether special planning tools such as Qualified Charitable Distributions or Qualified Longevity Annuity Contracts are involved.

This article is intended to highlight the most common RMD issues and planning traps. It is not a substitute for individualized tax advice, especially because RMD mistakes can create penalties, unnecessary taxes, or problems for beneficiaries.

What accounts are subject to RMDs?

RMD rules generally apply to tax-deferred retirement accounts, including:

• Traditional IRAs.
• Rollover IRAs.
• SEP IRAs.
• SIMPLE IRAs.
• 401(k) plans.
• 403(b) plans.
• 457(b) governmental plans.
• Other employer retirement plans.

Roth IRAs are different. During the original owner’s lifetime, Roth IRAs are not subject to RMDs. That is one reason Roth IRAs can be useful in retirement and estate planning.

Beginning in 2024, designated Roth accounts inside employer plans, such as Roth 401(k) and Roth 403(b) accounts, are also no longer subject to lifetime RMDs while the original account owner is alive.

However, beneficiaries of Roth IRAs and Roth employer plan accounts can still be subject to post-death distribution rules. The Roth label does not make inherited account rules disappear.

When do RMDs begin?

Your RMD starting age depends on your year of birth and the type of account.

For many current retirees, RMDs generally begin at age 73. Under SECURE 2.0, the starting age is scheduled to move to 75 for younger account owners.

A practical summary is:

• If you were born before July 1, 1949, your RMD starting age was generally 70½.
• If you were born from July 1, 1949 through December 31, 1950, your RMD starting age was generally 72.
• If you were born from 1951 through 1958, your RMD starting age is generally 73.
• If you were born in 1959, confirm the current IRS guidance before acting. SECURE 2.0 originally created ambiguity for this birth year, and subsequent IRS guidance clarified how the rules apply.
• If you were born in 1960 or later, your RMD starting age is generally 75.

For IRAs, including SEP and SIMPLE IRAs, the fact that you are still working does not delay the RMD requirement. Once you reach the applicable age, you must take RMDs from those accounts.

Employer plans may be different. If you are still working, and the plan allows it, you may be able to delay RMDs from your current employer’s plan until after you retire. This exception generally does not apply if you own more than 5% of the business sponsoring the plan, and it does not apply to plans from former employers.

Your first RMD deadline can be tricky

Your first RMD is due by April 1 of the year after the year you reach your required beginning date. Every later RMD is generally due by December 31 of the applicable year.

That sounds helpful, because it gives you a short delay. But there is a catch: if you delay your first RMD until the following year, you will usually have to take two RMDs in that same calendar year:

• The delayed first RMD by April 1.
• The second RMD for that current year by December 31.

Taking two RMDs in one year may increase your taxable income. That can affect your tax bracket, the taxation of Social Security benefits, Medicare IRMAA premiums, deductions, credits, and other tax-sensitive items.

For that reason, many retirees should compare the tax impact of taking the first RMD in the year they reach the applicable age versus waiting until the following April 1.

How is an RMD calculated?

For most IRA owners, the annual RMD is based on:

• The prior December 31 account balance.
• The account owner’s age at the end of the current year.
• The applicable IRS life expectancy table.

In many cases, the Uniform Lifetime Table is used. A different table may apply if the account owner’s spouse is the sole beneficiary for the entire year and is more than 10 years younger than the account owner.

The general formula is:

Prior December 31 account balance divided by the IRS life expectancy factor equals the RMD for the year.

For example, if the prior year-end IRA balance is $500,000 and the applicable IRS factor is 26.5, the RMD would be approximately $18,868.

That sounds straightforward, but errors can occur when the wrong table is used, the wrong account balance is used, accounts are combined improperly, beneficiary information is outdated, or the account contains hard-to-value assets.

You are responsible for getting the RMD right

Many custodians calculate RMDs for accounts they hold, but they may not have complete information about your other retirement accounts, inherited accounts, beneficiary status, or after-tax basis.

This is especially important if:

• You have more than one IRA.
• You moved accounts during the year.
• You completed a rollover near year-end.
• You inherited an account.
• Your spouse is more than 10 years younger and is your sole beneficiary.
• You own annuities, private investments, real estate, limited partnerships, or other hard-to-value assets inside a retirement account.
• Your account balance was affected by corrections, recharacterizations, or unusual transactions.
• You have after-tax basis in traditional IRAs.

The IRS may not accept “my custodian calculated it incorrectly” as a complete defense. You should review the calculation before the end of the year.

Multiple accounts can create aggregation traps

If you own more than one traditional IRA, you generally calculate the RMD separately for each IRA, but you may be able to withdraw the total IRA RMD from one IRA or from a combination of IRAs.

That aggregation rule does not mean all retirement accounts can be mixed together.

Important distinctions include:

• Traditional IRAs can generally be aggregated with other traditional IRAs.
• SEP IRAs and SIMPLE IRAs are generally included with IRA aggregation rules.
• Multiple 403(b) accounts may generally be aggregated with one another, but not with IRAs or 401(k) plans.
• 401(k) accounts generally must satisfy RMDs separately from each plan.
• You generally cannot take an IRA RMD from a 401(k), or a 401(k) RMD from an IRA.
• Inherited accounts have their own rules and should not be casually combined with your own retirement accounts.

This is one of the most common areas where people make mistakes. The ability to combine RMDs from multiple accounts is narrower than many people assume.

RMDs must come out before rollovers or Roth conversions

The year's RMD is not eligible for rollover or Roth conversion and generally must be distributed before the remaining balance can be converted.

An RMD itself cannot be rolled over or converted to a Roth IRA. The first money distributed from an account that is subject to an RMD is generally treated as satisfying the RMD first.

This can matter if you are planning a Roth conversion, consolidating accounts, or moving retirement assets to a new custodian. If the RMD is not handled first, the transaction can create tax problems and may require corrective action.

Missed RMDs can still be expensive

The penalty for failing to take an RMD used to be 50% of the shortfall. SECURE 2.0 reduced the penalty, but it is still significant.

If you miss all or part of an RMD, the penalty is generally 25% of the amount that should have been withdrawn but was not. The penalty may be reduced to 10% if the mistake is corrected within the applicable correction window and the proper tax filing is made.

The IRS may also waive the penalty if the shortfall was due to reasonable error and you take steps to correct it. This is generally handled using IRS Form 5329, along with an explanation.

The practical lesson is simple: if an RMD is missed, do not ignore it. Correct the problem as soon as possible and consult a tax professional.

Qualified Charitable Distributions can be valuable

A Qualified Charitable Distribution, or QCD, allows an IRA owner who is age 70½ or older to transfer money directly from an IRA to a qualified charity.

A QCD can count toward your RMD, but the amount that qualifies is excluded from taxable income. That can make a QCD more valuable than taking an IRA distribution, reporting it as income, and then making a charitable contribution personally.

QCDs can be especially useful for taxpayers who:

• Are charitably inclined.
• Do not itemize deductions.
• Want to reduce adjusted gross income.
• Want to manage the taxability of Social Security benefits.
• Want to manage Medicare IRMAA exposure.
• Want to satisfy part or all of an RMD without increasing taxable income.

For 2026, the QCD limit is $111,000 per person. Married couples can each use the limit if each spouse has their own eligible IRA and each spouse qualifies.

There are important rules:

• You must be at least age 70½ at the time of the distribution.
• The distribution must go directly from the IRA to the qualified charity.
• Donor-advised funds and private foundations generally do not qualify.
• QCDs are available only from eligible IRAs and generally cannot be made directly from employer retirement plans unless the assets have first been rolled into an eligible IRA.
• A QCD from an ongoing SEP or SIMPLE IRA generally does not qualify.
• You do not also receive a charitable deduction for the amount excluded from income as a QCD.
• If you have made deductible traditional IRA contributions after age 70½, those contributions may reduce the amount of your QCD that can be excluded from income.

A QCD can be an excellent planning tool, but it needs to be executed correctly.

Do not wait until the last day to make a QCD

If you plan to use a QCD to satisfy your RMD, timing matters.

The money must actually leave the IRA and be paid to the charity by year-end. Depending on how the IRA check-writing arrangement works, simply writing the check before December 31 may not be enough. Make sure the distribution satisfies the applicable year-end requirements. The check must clear the IRA in time.

For that reason, it is usually wise to start QCDs well before year-end.

After-tax IRA basis can complicate taxation

Some IRA owners have after-tax basis because they made nondeductible traditional IRA contributions.

After-tax basis can reduce the taxable portion of an IRA distribution, but it does not eliminate the RMD requirement. The RMD must still be taken, and the taxability of the distribution is determined under the IRA pro-rata rules.

The key point is that basis is not usually tied to one specific IRA account. Instead, the IRS generally looks at all traditional, SEP, and SIMPLE IRAs together when determining the taxable and nontaxable portion of a distribution.

This is reported using Form 8606. If you have ever made nondeductible IRA contributions, it is important to maintain accurate records.

Hard-to-value assets require advance planning

Most retirement accounts hold publicly traded securities that are easy to value. But some IRAs hold assets such as:

• Real estate.
• Private placements.
• Limited partnerships.
• Non-publicly traded securities.
• Certain annuity contracts.
• Other illiquid or hard-to-value investments.

These assets can create two problems.

First, the account still needs a fair market value for RMD calculation purposes. That value may require special reporting or valuation procedures.

Second, the account may need liquidity to make the RMD. If the account holds illiquid assets, it may be difficult to raise cash quickly.

If your retirement account owns hard-to-value or illiquid assets, the RMD process should begin well before December.

Annuities inside IRAs can create special issues

Deferred annuities held inside IRAs can complicate RMD calculations. The value used for RMD purposes may not be the same as the simple cash value shown on a statement, especially if the contract has riders or guarantees.

Annuitized IRA annuities can be more complicated because the annuity payment stream may have to be tested under separate rules.

If an IRA or employer plan includes annuity contracts, do not assume the RMD calculation is the same as it would be for a mutual fund or brokerage account. The insurance company, custodian, and tax professional may all need to be involved.

Qualified Longevity Annuity Contracts can reduce current RMDs

A Qualified Longevity Annuity Contract, or QLAC, is a special type of deferred annuity that can be purchased inside certain retirement accounts.

The value used to purchase the QLAC is generally excluded from the account balance used to calculate RMDs until income begins, subject to IRS limits and contract requirements. QLACs must satisfy IRS requirements to receive this treatment.

For 2026, the maximum QLAC premium limit is $210,000. Income from a QLAC generally must begin no later than age 85.

A QLAC is not appropriate for everyone. It can reduce current RMDs and provide later-life income, but it also involves giving up liquidity and accepting the terms of the annuity contract.

Inherited retirement accounts have separate rules

Inherited retirement accounts are subject to their own RMD rules. These rules changed significantly under the SECURE Act and later IRS regulations.

For many non-spouse beneficiaries, the old “stretch IRA” strategy is no longer available. Instead, many inherited retirement accounts must be fully distributed by the end of the 10th year after the original account owner’s death.

However, the 10-year rule is not always as simple as “take the money whenever you want within 10 years.” In some cases, annual beneficiary RMDs may also be required during years 1 through 9, especially when the original account owner had already reached the required beginning date before death. The applicable rules depend heavily on the year of death as well as the beneficiary's status.

There are also special rules for eligible designated beneficiaries, which may include:

• A surviving spouse.
• A minor child of the account owner, but only until the child reaches the applicable age.
• A disabled beneficiary.
• A chronically ill beneficiary.
• An individual who is not more than 10 years younger than the deceased account owner.

Inherited Roth accounts have their own rules as well. Even though Roth IRA owners do not have lifetime RMDs, inherited Roth accounts may still have required post-death distribution deadlines.

Because inherited account rules depend heavily on the relationship of the beneficiary, the type of account, the age of the original owner, and the date of death, beneficiaries should get advice before taking distributions or moving the account.

The year-of-death RMD must not be overlooked

If an account owner dies after RMDs have begun, the RMD for the year of death still has to be satisfied if it was not already taken.

This responsibility usually falls to the beneficiary, if the deceased owner had not already satisfied it. It can be easy to miss during a difficult time, especially if the account is being transferred or retitled.

Before rolling over, disclaiming, splitting, or distributing an inherited retirement account, confirm whether the year-of-death RMD has been completed.

RMD withholding can help with tax payments

RMDs are taxable income unless a special rule applies, such as a properly completed QCD or a distribution that includes after-tax basis.

Many retirees use federal and state tax withholding from RMDs as a practical way to cover tax liability.

One useful planning feature is that tax withheld from retirement distributions is generally treated as if it were paid evenly throughout the year, even if the withholding occurs late in the year. This can sometimes help taxpayers who otherwise might need quarterly estimated tax payments.

In general, those rules require you to pay at least 90% of your current-year tax liability or 100% of your prior-year tax liability, although the prior-year threshold is generally 110% for higher-income taxpayers.

This strategy should be reviewed with a tax professional. The withholding must be large enough to meet the applicable safe harbor rules, and state tax rules may differ.

Should you take your RMD early or late in the year?

There are two common approaches.

Some retirees take RMDs early in the year to make sure the requirement is satisfied and not forgotten. This approach can reduce stress and avoid year-end processing problems.

Others wait until later in the year to keep money invested and tax-deferred for as long as possible. This can make sense, but it leaves less time to fix mistakes and can be risky if year-end processing is delayed.

The best approach depends on your cash flow, investment strategy, tax planning, charitable giving plans, and comfort with deadlines.

Practical RMD checklist

Before year-end, review the following:

• Which accounts are subject to RMDs.
• Whether you have reached your required beginning date.
• Whether you are still working and whether any employer-plan exception applies.
• Whether each account has the correct prior December 31 balance.
• Whether the correct IRS life expectancy table is being used.
• Whether your spouse is your sole beneficiary and more than 10 years younger.
• Whether you have multiple accounts and whether aggregation is allowed.
• Whether any account is inherited.
• Whether a year-of-death RMD is required.
• Whether you plan to make a Roth conversion or rollover.
• Whether you plan to use a Qualified Charitable Distribution.
• Whether you have after-tax basis that requires Form 8606.
• Whether any account holds annuities or hard-to-value assets.
• Whether enough tax should be withheld from the distribution.
• Whether your RMD could affect Medicare premiums, Social Security taxation, or other tax items.

The bottom line

RMDs are easy to underestimate. For some retirees, the process is simple. For others, the rules can become complicated very quickly.

The best time to review RMD planning is before the end of the year, not after a deadline has been missed. If you are approaching your required beginning date, have multiple retirement accounts, inherited an IRA, are considering a Roth conversion, give to charity, or hold unusual assets inside a retirement account, it is worth reviewing the details with your financial advisor and tax professional. The years after retirement but before RMDs begin are often an important window for evaluating partial Roth conversions, because taxable income may be temporarily lower. A large one-time RMD generally cannot be avoided, but proactive Roth conversion planning before RMD age may help reduce future RMDs and potentially reduce future IRMAA exposure.

A little planning can help avoid penalties, reduce unnecessary taxes, and make retirement account distributions fit more smoothly into your overall financial plan.