What Is a Required Minimum Distribution (RMD)?
A Required Minimum Distribution (RMD) is the minimum amount you must withdraw from your tax-deferred retirement accounts each year once you reach a certain age. The IRS mandates these distributions to ensure that retirement savings, which received tax-deferred treatment during the accumulation phase, are eventually subject to income tax. RMDs apply to traditional IRAs, 401(k) plans, 403(b) plans, 457(b) plans, SEP IRAs, and SIMPLE IRAs. Notably, Roth IRAs are exempt from RMDs during the original owner's lifetime, making them a powerful estate planning tool.
Under the SECURE Act 2.0 enacted in December 2022, the RMD starting age increased from 72 to 73 for individuals turning 72 after December 31, 2022. The law further raises the RMD age to 75 starting in 2033. This change gives retirement savers additional years of tax-deferred growth before mandatory distributions begin. For 2026, if you turned 73 in 2024 or later, your RMDs are governed by the new schedule. Failure to take your full RMD results in a 25% excise tax on the shortfall (reduced from the previous 50%), or 10% if corrected within two years under the SECURE 2.0 provisions.
Your annual RMD must be withdrawn by December 31 of each year. For your first RMD year only, you may delay until April 1 of the following year, but you will then have two RMDs in one year (potentially pushing you into a higher tax bracket). The penalty for missing an RMD is 25% of the amount not withdrawn, reduced to 10% if corrected promptly.
SECURE Act 2.0: Key RMD Changes for 2026
| Birth Year | RMD Starting Age | First RMD Year | Applicable Law |
|---|---|---|---|
| 1950 or earlier | 70.5 | Varies | Pre-SECURE Act |
| 1951-1959 | 73 | 2024-2032 | SECURE Act 2.0 |
| 1960 or later | 75 | 2035+ | SECURE Act 2.0 |
The SECURE Act 2.0 also eliminated RMDs for Roth 401(k) accounts starting in 2024. Previously, Roth 401(k) holders had to take RMDs even though qualified withdrawals were tax-free, forcing them to either take unnecessary distributions or roll the funds into a Roth IRA. This change simplifies retirement planning and enhances the tax-free growth advantages of Roth 401(k) accounts. Additionally, the penalty for missed RMDs was reduced from 50% to 25%, with a further reduction to 10% if the mistake is corrected within a two-year window.
How RMDs Are Calculated
IRS Uniform Lifetime Table (2026)
The IRS updated the Uniform Lifetime Table effective January 1, 2022, reflecting increased life expectancies. These updated tables result in slightly smaller RMDs compared to the previous tables, giving retirees more flexibility with their tax-deferred savings. Below are the distribution periods for common ages. For the complete table, refer to IRS Publication 590-B.
| Age | Distribution Period | RMD % of Balance |
|---|---|---|
| 73 | 26.5 | 3.77% |
| 74 | 25.5 | 3.92% |
| 75 | 24.6 | 4.07% |
| 76 | 23.7 | 4.22% |
| 77 | 22.9 | 4.37% |
| 78 | 22.0 | 4.55% |
| 79 | 21.1 | 4.74% |
| 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% |
RMD Calculation Example
- 1Step 1: Account balance as of December 31 of the prior year = $500,000.00
- 2Step 2: Distribution period from the IRS Uniform Lifetime Table (Publication 590-B) for age 75 = 24.6
- 3Step 3: Required Minimum Distribution = $500,000 / 24.6 = $20,325.20
- 4Step 4: RMD as % of account balance = $20,325.20 / $500,000 = 4.07%
- 5Step 5: Estimated federal tax = $20,325.20 × 22% = $4,471.55
- 6Step 6: Estimated state tax = $20,325.20 × 5% = $1,016.26
- 7Step 7: After-tax RMD = $20,325.20 − $4,471.55 − $1,016.26 = $14,837.40
Strategies to Minimize RMD Tax Impact
RMD Tax Optimization Strategies
RMDs for Inherited Retirement Accounts
The SECURE Act of 2019 eliminated the stretch IRA for most non-spouse beneficiaries. If you inherit an IRA or 401(k) from someone who died after December 31, 2019, most non-spouse beneficiaries must withdraw the entire account within 10 years (the 10-year rule). Exceptions include surviving spouses (who can treat the account as their own or use the Single Life Expectancy Table), minor children of the deceased (until they reach the age of majority), beneficiaries who are disabled or chronically ill, and beneficiaries who are not more than 10 years younger than the deceased. In 2024, the IRS finalized regulations requiring annual RMDs within the 10-year period if the original owner had already begun taking RMDs.
For inherited Roth IRAs, the 10-year rule still applies, but there are no annual RMD requirements during the 10-year window since the original owner would not have been subject to RMDs. The entire balance must simply be withdrawn by the end of the tenth year following the year of death. Since qualified Roth distributions are tax-free, beneficiaries can maximize tax-free growth by waiting until the final year to withdraw.
Common RMD Mistakes to Avoid
- Missing the deadline: Your RMD must be taken by December 31 (or April 1 for your first RMD year). Missing the deadline triggers a 25% excise tax on the shortfall.
- Using the wrong balance: Your RMD is based on the December 31 balance of the PRIOR year, not the current year. If your account grew or shrunk during the year, that does not affect the current year RMD.
- Forgetting inherited accounts: Inherited IRAs have separate RMD requirements. You cannot aggregate inherited IRA RMDs with your own IRA RMDs.
- Not aggregating traditional IRAs: You can take your total traditional IRA RMD from any one or combination of your traditional IRAs, but 401(k) RMDs must be taken from each 401(k) separately.
- Confusing Roth IRA rules: Original Roth IRA owners never have RMDs, but inherited Roth IRA beneficiaries are subject to the 10-year rule.
- Overlooking the QCD: If you are donating to charity, always consider a Qualified Charitable Distribution before taking your RMD as ordinary income.
RMD Planning for Retirement Income
RMDs should be integrated into your overall retirement income plan. Many retirees rely on a combination of Social Security benefits, pension income, RMDs from tax-deferred accounts, and withdrawals from taxable accounts. The order in which you draw from these sources significantly impacts your lifetime tax burden. Generally, financial planners recommend spending taxable account funds first, then tax-deferred accounts, and finally Roth accounts, though individual circumstances vary. Use our Retirement Withdrawal Calculator for comprehensive withdrawal sequencing analysis.
For UK-based investors managing retirement distributions, try our sister site <a href="https://ukcalculator.com">UK Calculator</a> for HMRC-compliant tools including pension drawdown, lifetime allowance, and ISA calculators tailored to the UK tax system.
How This RMD Calculator Works
Our RMD calculator uses the IRS Uniform Lifetime Table to determine your distribution period based on your age. If your sole beneficiary is your spouse and they are more than 10 years younger, the calculator applies the Joint Life and Last Survivor Expectancy Table, which provides a longer distribution period and smaller required distribution. The calculator then divides your December 31 prior-year account balance by the appropriate distribution period to determine your RMD. Tax estimates are based on the federal and state tax rates you provide, applied to the full RMD as ordinary income. Your actual tax liability may differ based on your total income, deductions, and credits.
