Required Minimum Distribution

A required minimum distribution (RMD) is the minimum amount the IRS forces out of tax-deferred retirement accounts each year. It applies to traditional IRAs, 401(k)s, and 403(b)s, starting the year the owner turns 73 under SECURE 2.0. The age rises to 75 for those born in 1960 or later. The amount is the prior December 31 balance divided by a life-expectancy factor from the IRS Uniform Lifetime Table, roughly 3.8% of the balance at 73. Roth IRAs are never subject to RMDs, and Roth 401(k) balances have been exempt since 2024.

The penalty for missing one is a 25% excise tax on the shortfall, cut to 10% if the withdrawal is corrected within two years, per SECURE 2.0. The first RMD can be deferred to April 1 of the following year, though deferring stacks two distributions into one tax year. Funds inside a current employer's 401(k) can delay RMDs past 73 while still working, an exception that does not apply to IRAs.

The calculation is one division: the prior year's December 31 balance divided by the Uniform Lifetime Table factor for your age this year. At 73 the factor is 26.5, so a $1,000,000 balance requires roughly $37,736; at 75 the factor is 24.6, requiring roughly $40,650. The percentage climbs every year as the divisor shrinks, which is why the table is exactly as aggressive as it looks. IRA RMDs can be aggregated across custodians and taken from any one of them, while 401(k) RMDs must come from each plan separately.

The timing rules matter more than the math. The first RMD covers the year you turn 73 and can be taken as late as April 1 of the next year, but the second RMD is still due that December, stacking roughly $75,000 of income into one tax year on a $1,000,000 balance. Qualified charitable distributions, available from age 70½, send up to roughly $110,000 a year (indexed) from an IRA straight to charity and count toward the RMD without ever touching taxable income. The still-working exception defers RMDs in a current employer's 401(k) until retirement, but never in an IRA.

RMDs are where decades of tax deferral meet an unforgiving calendar, and the bill lands in years most retirees cannot easily absorb. RMD income stacks on Social Security and can push Medicare premiums into the IRMAA surcharge tiers, which begin just above $100,000 of single income (indexed annually).

I watched a colleague named Brent (yes, that Brent) defer his first RMD to April 1 because the deadline sounded optional, then take the second that December. The stacked distributions added roughly $38,000 of extra income to one tax year and nudged his Medicare premiums up an IRMAA tier the following year. The deferral bought twelve months and cost two years of surcharges.

The highest-leverage thing most Americans can do is plan the RMD schedule alongside Social Security claiming before age 73 arrives, converting in the gap years if the brackets favor it. The RMD calculator computes each year's minimum, and the social security calculator shows how the two incomes stack.