Required Minimum Distributions

A Required Minimum Distribution (RMD, sometimes called a Minimum Required Distribution or MRD) is the part of the deal you made with the IRS when you saved pre-tax money and let it grow tax-deferred. At a certain age, the IRS requires you to start taking some of it out each year, and paying tax on it.

When do they start?

For most people today, RMDs begin in the year you turn 73. If you were born in 1960 or later, they begin at 75. (Older rules used 70½ and then 72; you may still see those numbers on older websites.)

Your first RMD can wait until April 1 of the following year. But if you wait, you will take two RMDs in that year, the delayed first one and the second one by December 31, which can push you into a higher tax bracket. Every RMD after the first is due by December 31.

Which accounts have them?

• Traditional, SEP and SIMPLE IRAs
• Most workplace plans: 401(k), 403(b), 457(b) and similar. If you are still working and do not own 5% or more of the company, your current employer’s plan may let you wait until you retire.
• Not Roth IRAs while the owner is alive, and, since 2024, not Roth accounts inside workplace plans.
• Inherited accounts follow their own rules, which changed significantly in recent years.

How much?

Each year’s RMD is the account’s value on December 31 of the prior year, divided by a life-expectancy factor from the IRS. The factor shrinks as you age, so the percentage you must take grows. Try our RMD calculator for an estimate.

What if one is missed?

The IRS can charge an excise tax on the amount you did not take: generally 25%, reduced to 10% if the shortfall is corrected within the correction window.

RMD you were required to take	$10,000
What you actually took	$8,000
Shortfall	$2,000
Excise tax at 25% (or 10% if corrected in time)	$500 (or $200)

The shortfall itself is still taxable income when you take it. The IRS can waive the excise tax for reasonable error, using Form 5329 with an explanation, so act quickly if you discover a missed RMD.

Who needs to pay attention?

Every owner of an IRA or workplace retirement plan, and their beneficiaries. If an owner missed RMDs, the beneficiaries may have to sort it out. Don’t assume your family has this handled.

Source: IRS, Retirement plan and IRA required minimum distributions FAQs.