RMDs start at 73 (75 from 2033) for traditional retirement accounts — Roth IRAs and Roth 401(k)s are exempt
SECURE 2.0 cut the missed-RMD penalty from 50% to 25% (10% if corrected within two years)
Consider Roth conversions before RMD age to reduce future mandatory distributions, especially while falling rates compress tax-deferred returns
Qualified Charitable Distributions (up to $105,000/year) count toward your RMD and are excluded from taxable income
Never delay your first RMD to April 1 without accounting for the double-distribution tax hit in that calendar year
The Federal Reserve has been steadily cutting interest rates since September 2025, bringing the Fed Funds rate down from 4.22% to 3.64% by early 2026. For retirees drawing income from traditional retirement accounts, this shift carries real consequences. Lower rates mean lower yields on bonds and money market funds — the very holdings many retirees depend on. That makes understanding Required Minimum Distributions, and planning around them, more important than ever.
Required Minimum Distributions, or RMDs, are the amounts the IRS requires you to withdraw from most tax-deferred retirement accounts each year once you reach a certain age. The government gave you a tax break when you contributed to these accounts. RMDs are how it eventually collects. You deferred the taxes; now they come due.
The rules governing RMDs changed significantly with the SECURE 2.0 Act, signed into law in December 2022. The starting age increased, penalties shrank, and Roth 401(k)s gained a major advantage. Whether you are approaching retirement or already taking distributions, understanding these rules can save you thousands in taxes and penalties.
What Are RMDs?
How to Calculate Your RMD
RMD on $500,000 Balance by Age
SECURE 2.0 Changes to RMDs
RMD Strategies in a Rate-Cutting Cycle
The current interest rate environment adds a layer of urgency to RMD planning. The Federal Reserve began cutting rates in September 2025 and has brought the Fed Funds rate down meaningfully over the past several months.
Fed Funds Rate: Cutting Cycle Impact
Common RMD Mistakes to Avoid
Conclusion
Required Minimum Distributions are one of retirement's few true deadlines — miss them and you pay a penalty, ignore them and your tax situation deteriorates. The good news is that SECURE 2.0 has made the rules somewhat more forgiving, with a later start age and lower penalties for honest mistakes.
The action items are clear. Know your RMD start date — 73 for most current retirees, 75 for those born in 1960 or later. Calculate your distribution using the IRS Uniform Lifetime Table. Consider Roth conversions during the gap years before RMDs begin, especially while falling interest rates compress the future income potential of tax-deferred accounts. Use QCDs if you are charitably inclined. And above all, do not miss the deadline. A few minutes of planning each year can save you from a 25% penalty and keep your retirement income strategy on track.
Disclaimer: This content is for informational purposes only and does not constitute financial advice. Consult qualified professionals before making investment decisions.
A Required Minimum Distribution is the smallest amount you must withdraw from a tax-deferred retirement account each year. The IRS mandates these withdrawals because contributions to traditional retirement accounts were made with pre-tax dollars. Without RMDs, money could sit in these accounts indefinitely, compounding tax-free — something Congress never intended.
Which Accounts Are Subject to RMDs?
RMDs apply to the following account types:
Traditional IRAs — the most common RMD-subject account
401(k) plans — employer-sponsored defined contribution plans
403(b) plans — used by nonprofits, schools, and government entities
SEP IRAs — Simplified Employee Pension plans for self-employed individuals
SIMPLE IRAs — Savings Incentive Match Plans for small employers
Which Accounts Are Exempt?
Roth IRAs are exempt from RMDs during the owner's lifetime. Because contributions were made with after-tax dollars, the IRS does not require mandatory withdrawals.
Roth 401(k)s are now also exempt from RMDs starting in 2024, thanks to the SECURE 2.0 Act. Previously, Roth 401(k) holders had to take RMDs or roll into a Roth IRA to avoid them. That workaround is no longer necessary.
When Do RMDs Begin?
Under current law, RMDs must begin at age 73 for individuals born between 1951 and 1959. Starting in 2033, the age increases to 75 for those born in 1960 or later. Your first RMD is due by April 1 of the year after you turn 73. Every subsequent RMD must be taken by December 31 of that year.
A critical detail: if you delay your first RMD to that April 1 deadline, you will owe two RMDs in the same calendar year — the delayed first distribution plus the regular second-year distribution. That double hit can push you into a higher tax bracket.
The RMD formula is straightforward:
RMD = Account Balance (as of December 31 of the prior year) ÷ IRS Life Expectancy Factor
The IRS publishes life expectancy tables in Publication 590-B. Most account holders use the Uniform Lifetime Table. The divisor decreases as you age, meaning your required withdrawal percentage grows larger each year.
Worked Example
Suppose you are 73 years old and your traditional IRA balance was $500,000 on December 31 of the prior year. The Uniform Lifetime Table assigns a distribution period (life expectancy factor) of 26.5 for age 73.
RMD = $500,000 ÷ 26.5 = $18,868
You must withdraw at least $18,868 during the year. You can always withdraw more, but you cannot carry any excess forward to reduce future RMDs.
How RMDs Grow With Age
As you age, the life expectancy factor shrinks, and the required distribution rises — even if your account balance stays flat. Here is what a $500,000 balance would require at various ages:
At age 73, the IRS requires roughly 3.8% of your balance. By age 90, that figure climbs to over 9%. This escalation is why early planning matters — the tax impact compounds over time.
Multiple Accounts
If you hold multiple traditional IRAs, you calculate the RMD for each account separately, but you can take the total from any one or combination of your IRAs. This aggregation rule applies only to IRAs. For 401(k)s and 403(b)s, you must take each account's RMD from that specific account.
The SECURE 2.0 Act, passed as part of the Consolidated Appropriations Act of 2023, made several meaningful changes to RMD rules. Here are the ones that matter most.
Higher Starting Age
The original SECURE Act of 2019 raised the RMD age from 70½ to 72. SECURE 2.0 pushed it further:
Age 73 for those born 1951–1959 (effective 2023)
Age 75 for those born 1960 or later (effective 2033)
This gives younger retirees up to two additional years of tax-deferred growth compared to previous law.
Reduced Penalties
The penalty for missing an RMD was previously one of the harshest in the tax code — a 50% excise tax on the amount not withdrawn. SECURE 2.0 cut that to 25%. Better still, if you correct the shortfall within two years, the penalty drops to just 10%.
This is a significant improvement, but 10% is still a steep price for an oversight. Setting calendar reminders and working with a tax advisor remain essential.
Roth 401(k) Exemption
Perhaps the most underappreciated change: Roth 401(k) accounts no longer require RMDs starting in 2024. Previously, Roth 401(k) holders had to either take distributions or roll their balance into a Roth IRA to avoid them. Now, Roth 401(k) balances can remain invested and grow tax-free indefinitely during the owner's lifetime — just like a Roth IRA.
This change makes Roth 401(k) contributions more attractive for high earners who want tax-free growth without the income limits that restrict Roth IRA contributions.
For retirees holding bonds, CDs, and money market funds in their retirement accounts, falling rates create reinvestment risk. As existing holdings mature, the replacement yields are lower. A CD ladder that was generating 5% a year ago may now roll into instruments yielding 3.5–4%. That means your account generates less income, even as RMD amounts remain dictated by your balance and age.
Tax Bracket Management
Because RMDs are taxed as ordinary income, the amount you withdraw directly affects your tax bracket, your Medicare premiums (via IRMAA surcharges), and your Social Security taxation threshold. In a falling-rate environment where portfolio income is declining, you may have room to take slightly larger distributions in lower-rate years to reduce the balance subject to future RMDs at higher forced-withdrawal percentages.
Qualified Charitable Distributions (QCDs)
If you are 70½ or older, you can direct up to $105,000 per year (indexed for inflation) from your IRA directly to a qualified charity. This Qualified Charitable Distribution counts toward your RMD but is excluded from your taxable income. In a year when you are managing bracket thresholds carefully, QCDs are one of the most tax-efficient tools available.
Roth Conversions Before Age 73
The years between retirement and your first RMD represent a strategic window. Your income is often lower — you may have stopped working but have not yet started Social Security or RMDs. Converting traditional IRA balances to a Roth IRA during this gap lets you pay taxes at potentially lower rates, reduce the balance subject to future RMDs, and shift assets into an account that grows tax-free with no lifetime RMD requirement.
With rates falling and bond yields compressing, the case for Roth conversions strengthens. You are paying taxes now on a balance that may generate lower future returns in a traditional account, while gaining permanent tax-free growth in the Roth.
Even with reduced penalties, RMD errors can be costly. Here are the most frequent mistakes and how to sidestep them.
1. Missing the Deadline
The most basic error is simply forgetting. Your first RMD has an April 1 grace period, but every subsequent distribution must be completed by December 31. Missing the deadline triggers the 25% excise tax. Set reminders, automate distributions if your custodian allows it, and review your plan each January.
2. Forgetting Inherited IRAs
Inherited IRAs have their own RMD rules, which are separate from your personal accounts. Under the SECURE Act's 10-year rule, most non-spouse beneficiaries must empty an inherited account within 10 years of the original owner's death. The IRS has clarified that annual distributions may also be required during that 10-year window if the original owner had already begun RMDs. Failing to account for inherited accounts is a common and expensive oversight.
3. Misunderstanding Aggregation Rules
As noted earlier, you can aggregate RMDs across multiple traditional IRAs and take the total from any one account. However, this rule does not apply to 401(k)s — each 401(k) plan's RMD must come from that specific plan. Mixing up these rules can leave you short on one account while over-distributing from another, and the IRS will penalise the shortfall regardless of what you withdrew elsewhere.
4. Overlooking the First-Year Double Distribution
Delaying your first RMD to April 1 of the following year means two taxable distributions in one calendar year. For someone near a bracket boundary, this can result in thousands of dollars in additional taxes. In most cases, taking your first RMD in the year you turn 73 — rather than waiting until the following April — is the smarter move.
You cannot convert your RMD amount to a Roth IRA. The RMD must be satisfied first, and only amounts above the RMD can be converted. Planning conversions before you reach RMD age avoids this sequencing issue entirely.