For thirty or forty years, you did everything right. You contributed to your 401(k). You rolled it into an IRA when you changed jobs. You let the tax-deferred compounding work its quiet magic. Then somewhere in your seventies, the IRS sends a polite reminder: it would like its taxes back, please. Required Minimum Distributions are the federal government's mechanism for forcing tax-deferred accounts to start distributing — and the rules around them have tripped up some of the most financially literate retirees in the country. The penalty for getting it wrong used to be 50 percent of the missed amount. It is still 25 percent. This is one of those areas where ignorance is not just expensive; it is genuinely punishing.
What an RMD Actually Is
A Required Minimum Distribution is the amount you must withdraw from certain retirement accounts each year, beginning at a specified age. The IRS calculates the minimum based on your account balance at the end of the prior year, divided by a life-expectancy factor from official tables.
The accounts that have RMDs include traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, 457(b) plans, and inherited retirement accounts of all types. Roth IRAs do not have RMDs during the original owner's lifetime — a major reason Roth conversions get more attention as people approach their seventies.
When RMDs Start
The age has changed twice in the past several years, which is part of why so many retirees are confused.
Before the SECURE Act of 2019, RMDs began at age 70½. The original SECURE Act pushed the starting age to 72. SECURE 2.0, signed into law in late 2022, raised it again — to 73 for those who reach age 72 after December 31, 2022, and to 75 for those who reach age 74 after December 31, 2032.
If you are reading this in 2026, the starting age is 73 unless you were already taking RMDs under the old rules. Anyone born in 1951 or later falls under the new schedule.
The Calculation
The math is mercifully simple. At the end of each year, you take your account balance and divide it by a "distribution period" — a number drawn from the IRS Uniform Lifetime Table. For a 73-year-old, the current factor is around 26.5. So a $1,000,000 IRA balance produces an RMD of about $37,700 ($1,000,000 ÷ 26.5).
The factor decreases each year as you age, which means the percentage of the account you must withdraw rises every year. By age 90, the factor is closer to 12.2, requiring about 8.2 percent of the balance to come out.
There are exceptions. Married couples whose spouse is more than ten years younger can use a different table that produces smaller withdrawals. Inherited IRAs use different rules entirely.
The First Year Trap
Your first RMD has a quirk that catches many retirees. You can delay your first distribution until April 1 of the year after you turn 73. That sounds like a kindness, but it has a hidden cost: if you delay, you'll have to take two distributions in that second year — the delayed one for the prior year, and the regular one for the current year. Two RMDs in the same calendar year can push you into a higher tax bracket, raise Medicare premiums, and trigger taxation of Social Security benefits.
Most planners suggest taking the first RMD in the year you turn 73, even though you technically have until April 1 of the following year, simply to spread the income evenly across two tax years.
The Penalty
Skip an RMD, and the IRS imposes an excise tax. Until 2022, the penalty was a punishing 50 percent of the amount you should have withdrawn. SECURE 2.0 reduced it to 25 percent — and to 10 percent if you correct the error within a "correction window," typically two years.
A retiree who forgets a $40,000 RMD could owe $10,000 in additional tax under the new lower penalty. Under the old rules, it was $20,000. There is also still the regular income tax owed on the eventual distribution itself.
The IRS will sometimes waive the penalty if you can show the failure was due to "reasonable error" and you have taken steps to fix it. This requires filing Form 5329 and a written explanation. Most retirees who have missed an RMD have successfully obtained relief — but it is a hassle, and not guaranteed.
Strategies for Reducing the Bite
For those approaching RMD age, several strategies can shrink the eventual tax bill.
Roth conversions in lower-income years. Between retirement and age 73, many retirees have a window of relatively low income. Converting traditional IRA money to a Roth in those years reduces the future RMD base. The conversion is taxed now at potentially lower rates than the future RMDs would be.
Qualified Charitable Distributions. Once you turn 70½ — note, this age has not changed — you can direct up to $108,000 per year (the 2025 limit, indexed annually) directly from a traditional IRA to a qualified charity. The amount counts toward your RMD but is excluded from taxable income. For retirees who give to charity anyway, a QCD is essentially a more tax-efficient way to do what you were already going to do.
Aggregating thoughtfully. RMDs from multiple traditional IRAs can be aggregated and pulled from a single account, but 401(k) RMDs must be taken from each plan separately. Knowing which accounts can be combined simplifies cash flow planning.
The key insight: RMDs are not a tax — they are a forced timing of taxes that have always been due. The strategies above don't eliminate the tax. They reshape when and at what rate you pay it.
What Happens to RMDs in an Inherited Account
When you inherit a retirement account, the rules change again. Most non-spouse beneficiaries who inherited an IRA after 2019 must drain the account within 10 years. Recent IRS guidance has clarified that some inheritors must take annual RMDs during those ten years rather than letting it sit and pulling it all in year ten. The penalties for missing those distributions are the same as the original-owner rules.
Spousal inheritors have more options, including treating the inherited account as their own. The rules here are unusually nuanced, and a retirement-focused CPA or financial planner is genuinely worth the cost.
The Bottom Line
RMDs are not optional. The IRS knows your account balance — your custodian reports it — and the system flags missed distributions automatically. Calendar a reminder for the fall of each year, calculate the amount, take the distribution, and move on.
The retirees who handle RMDs well are not the ones with the most exotic strategies. They are the ones who plan early, track their accounts, and treat RMDs as a regular part of retirement income — not a surprise that arrives uninvited at the worst possible time. The rules are not particularly difficult. They just punish people who do not pay attention.
