Required minimum distributions are mandatory annual withdrawals that retirement account holders must take once they reach a certain age. Many Americans hold retirement accounts such as 401(k) plans or traditional IRAs, yet many do not fully understand the RMD rules until the deadlines are already approaching. Getting ahead of these requirements can protect your savings and reduce your overall tax burden for years to come.
The IRS requires these distributions to ensure that tax-deferred retirement savings are eventually subject to income tax. Failing to take your required minimum distribution on time triggers one of the steepest penalties in the tax code: a 25% excise tax on the amount you should have withdrawn but did not. That penalty drops to 10% if you correct the error within two years, but avoiding it altogether is far simpler than fixing it after the fact. Proactive tax advisory services can help you map out the timing well before the first deadline arrives.
What Age Do Required Minimum Distributions Start?
The required minimum distribution age is currently 73 for most retirement account holders. Under the SECURE 2.0 Act, this threshold is scheduled to rise to 75 beginning in 2033. Your first RMD must be taken by April 1 of the year following the year you turn 73.
While that April 1 deadline for your initial distribution may seem generous, delaying your first RMD into the following calendar year creates a compounding problem. You would then need to take two required minimum distributions in the same year: the delayed first distribution plus your regular annual RMD due by December 31. Taking two distributions in one year can push you into a higher tax bracket, increase Medicare surcharges through IRMAA (Income-Related Monthly Adjustment Amount), and trigger taxes on a larger portion of your Social Security benefits.
After your first distribution, all subsequent RMDs must be taken by December 31 of each calendar year. There is no flexibility on this deadline: miss it, and the excise tax applies automatically.
How to Calculate Your Required Minimum Distribution
Calculating your required minimum distribution involves dividing your retirement account balance as of December 31 of the prior year by a life expectancy factor from the IRS Uniform Lifetime Table. The IRS updated these tables in 2022, and the current factors result in slightly smaller required withdrawals than the previous tables.
As you age, the life expectancy factor decreases, which means a higher percentage of your account balance must be distributed each year. For example, at age 73 the distribution period is 26.5 years, resulting in roughly a 3.77% withdrawal. By age 80, the period shortens to 20.2 years, pushing the withdrawal rate to about 4.95%. At age 85, the factor drops further to 16.0, requiring approximately 6.25% of the balance.
If you hold multiple traditional IRAs, you must calculate the RMD for each account separately but can take the total amount from any one or combination of your IRAs. However, 401(k) RMDs must be taken individually from each 401(k) account, and you cannot aggregate them across plans.
Anyone who inherits an IRA after the death of the original account holder is subject to separate RMD rules. Under the SECURE Act, most non-spouse beneficiaries must fully distribute an inherited IRA within 10 years, and annual distributions may be required during that period depending on whether the original owner had already started taking RMDs.
Qualified Charitable Distributions: A Tax-Smart RMD Strategy
A qualified charitable distribution (QCD) is one of the most effective strategies for reducing the tax impact of required minimum distributions. QCDs allow individuals age 70½ or older to transfer up to $108,000 in 2025 (this amount is now indexed to inflation, up from the previous $100,000 cap) directly from an IRA to a qualified charity. The distributed amount satisfies your RMD obligation but is excluded from your taxable income entirely.
This strategy is particularly valuable for the roughly 90% of taxpayers who claim the standard deduction rather than itemizing. Without a QCD, a charitable donation from your bank account provides no tax benefit unless your total itemized deductions exceed the standard deduction. A QCD, by contrast, delivers the tax savings regardless of whether you itemize, because the money never appears as income on your return in the first place.
To qualify, the distribution must go directly from your IRA custodian to the charity, so you cannot withdraw the funds first and then donate them. The charity must be a 501(c)(3) organization, and donor-advised funds and private foundations do not qualify.
Roth IRA Conversions: Reducing Future RMDs
Converting a portion of a traditional IRA or 401(k) to a Roth IRA can meaningfully reduce your future required minimum distributions. Once funds are in a Roth IRA, they grow tax-free and are not subject to RMDs during the original owner’s lifetime. This makes Roth conversions a powerful long-term planning tool, especially for retirees who do not need all of their retirement income to cover living expenses.
The tradeoff is straightforward: you pay income tax on the converted amount in the year of conversion. This strategy works best during years when your taxable income is lower than usual, for example the gap years between retirement and age 73 when RMDs have not yet started, or a year with unusually high deductions.
By strategically converting portions of your traditional retirement accounts over several years, you can reduce the balance subject to future RMDs and potentially keep yourself in a lower tax bracket throughout retirement. This approach also benefits heirs, since inherited Roth IRAs are not subject to income tax upon distribution.
Early Withdrawals to Delay Social Security
Depending on your health and financial situation, it may make sense to begin taking small withdrawals from retirement accounts after age 59½, when penalty-free distributions become available, but well before the required minimum distribution age of 73. The goal of this strategy is to use retirement account funds to cover living expenses while delaying Social Security benefits.
Your monthly Social Security benefit increases by approximately 8% for each year you delay claiming beyond your full retirement age, up to age 70. For someone with a full retirement age of 67, waiting until 70 results in a 24% permanent increase in monthly benefits. Using retirement account withdrawals to bridge the gap can produce a significantly higher guaranteed income stream for the rest of your life.
This approach also has the added benefit of reducing your traditional IRA or 401(k) balance before RMDs begin, which lowers the required minimum distribution amounts you will eventually face and spreads your tax liability more evenly across retirement years.
The Still-Working Exception for 401(k) Plans
If you are still employed at the company that sponsors your 401(k), you are not required to take RMDs from that specific plan, regardless of your age. This exception applies as long as you remain an active employee of the plan sponsor, and there is no minimum number of hours you must work. Even a few hours per month can qualify.
However, this exception comes with important limitations. It does not apply if you own more than 5% of the company sponsoring the plan. It also has no effect on IRA accounts, since traditional IRA RMDs are still required based on age, regardless of your employment status. And if you have 401(k) accounts from previous employers, those accounts are not covered by the still-working exception and will require distributions on the standard schedule.
For those who enjoy their work or have the option to consult part-time, this rule can provide a meaningful opportunity to continue tax-deferred growth in a 401(k) while satisfying RMD obligations only on other retirement accounts.
Planning for RMDs Is an Ongoing Process
Required minimum distributions are not a one-time calculation. They are a recurring obligation that grows larger each year as the life expectancy divisor shrinks. Effective RMD planning integrates with your broader tax strategy, estate plan, and retirement income needs. Starting early, ideally several years before age 73, gives you the most flexibility to use Roth conversions, QCDs, and early withdrawals to manage the tax impact.
Each of these strategies has its own eligibility requirements, deadlines, and tax consequences. Working with a CPA who understands the interplay between RMDs, Social Security timing, Medicare premiums, and estate planning can help you avoid costly mistakes and keep more of your retirement savings working for you. The team at Pease Bell offers tax and accounting services that coordinate these moving parts into a single coherent plan.
Frequently Asked Questions
What is the required minimum distribution age?
The required minimum distribution age is currently 73 for most retirement account holders. Under the SECURE 2.0 Act, this age will increase to 75 starting in 2033. Your first RMD must be taken by April 1 of the year after you turn 73, with subsequent distributions due by December 31 each year.
How do I calculate my required minimum distribution?
Divide your retirement account balance as of December 31 of the prior year by the life expectancy factor from the IRS Uniform Lifetime Table that corresponds to your age. For example, at age 73 the factor is 26.5, so a $500,000 account balance would produce an RMD of approximately $18,868. Each IRA can be calculated separately and withdrawn from any combination of IRAs, but 401(k) RMDs must be taken from each plan individually.
What is the penalty for missing an RMD?
The penalty for failing to take a required minimum distribution is a 25% excise tax on the amount that should have been withdrawn. If you correct the shortfall within two years under the IRS correction window, the penalty is reduced to 10%. Filing Form 5329 and requesting a waiver for reasonable cause may also eliminate the penalty in some cases.
Can a qualified charitable distribution satisfy my RMD?
Yes. A qualified charitable distribution of up to $108,000 per year (2025 limit, indexed to inflation) can count toward your RMD while being excluded from taxable income. The donation must go directly from your IRA custodian to a qualifying 501(c)(3) charity. QCDs are available starting at age 70½, which is before the required minimum distribution age of 73.
Should I convert my IRA to a Roth to avoid RMDs?
Roth IRA conversions can reduce future required minimum distributions because Roth IRAs are not subject to RMDs during the owner’s lifetime. However, you must pay income tax on the converted amount in the year of conversion. This strategy is most effective during low-income years, such as early retirement before RMDs begin, and works best when spread across multiple tax years to avoid jumping into a higher bracket.
Do I have to take RMDs if I am still working?
If you are still employed by the company sponsoring your 401(k), you can delay RMDs from that specific 401(k) plan regardless of your age. There is no minimum hour requirement. However, this exception does not apply if you own more than 5% of the company, and it does not affect RMDs from IRAs or 401(k) plans at previous employers.
