Required Minimum Distributions: Your Questions, Answered

You’ve probably put years of savings into a traditional IRA or 401(k) without paying tax on it. Eventually, though, the IRS wants its share. That’s where required minimum distributions, or RMDs, come in. Here are the questions people ask most.

What exactly is an RMD?

It’s the minimum amount you have to take out of certain retirement accounts each year once you reach a certain age. Those withdrawals are generally taxed as regular income.

When do I have to start?

Under current rules, RMDs begin at 73 for anyone who turns 72 after 2022. That age is set to rise to 75 for people who turn 74 after 2032.

You’re allowed to put off your very first RMD until April 1 of the following year. Just know that if you do, you’ll take two in the same year, which can bump up your taxes.

Which accounts does this apply to?

Traditional, SEP and SIMPLE IRAs, plus workplace plans like 401(k)s, 403(b)s and 457(b)s. If you’re still working, you may be able to wait on RMDs from your current employer’s plan.

Roth IRAs are different: you don’t have to take anything out during your lifetime. And since 2024, the same is true for Roth money in workplace plans.

How much do I have to take?

In most cases it’s your account balance at the end of last year divided by a life expectancy number from IRS tables. The older you get, the bigger the share you have to take. If you have more than one IRA, you can add up the amounts and take the total from whichever IRA you like. 401(k)s are different: each one usually needs its own withdrawal.

What if I forget?

It’s costly. The penalty is 25% of the amount you should have taken, though it drops to 10% if you fix it quickly. A lot of people simply set up automatic withdrawals so they never have to think about it.

Is there anything I can do to plan ahead?

A few things are worth asking about:

• Roth conversions in the years before RMDs start can shrink the balance you’ll be required to draw from later.
• Qualified charitable distributions let IRA owners 70½ and older give straight from the IRA to a charity. The gift can count toward your RMD without being added to your taxable income.
• Look at the whole picture. Bigger RMDs can make more of your Social Security taxable and raise your Medicare premiums, so it helps to plan them alongside everything else.

A quick note: this is general information, not tax, legal or investment advice. The rules change from time to time, and your situation is your own, so check with a professional before you act on anything here.