You spent decades putting money into a retirement account. The IRS let you do it tax-deferred — meaning you didn't pay taxes on that money when you earned it.
At some point, they want those taxes. That's what an RMD is.
What RMD stands for
Required Minimum Distribution. It's the minimum amount the IRS requires you to withdraw from certain retirement accounts each year, starting at age 73 (changed from 72 under the SECURE 2.0 Act, effective 2023).
Accounts it applies to: Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and most other employer-sponsored plans.
Accounts it does not apply to: Roth IRAs (while the original owner is alive). This is one of the main reasons people convert to Roth accounts before retirement.
How the amount is calculated
The formula: account balance ÷ life expectancy factor
The life expectancy factor comes from the IRS Uniform Lifetime Table. For most people, the factor at age 73 is 26.5. At 80, it's 20.2. As you get older, the factor decreases — so you're required to take out a larger percentage each year.
Example: $500,000 account balance at age 73. $500,000 ÷ 26.5 = $18,868. That's your RMD for the year.
The balance used is your December 31 account balance from the prior year.
When you have to take it
The deadline is December 31 each year. The one exception: your very first RMD. You can delay the first one until April 1 of the year after you turn 73.
Taking that delay means you'll have two RMDs in one year, which creates a larger tax bill. Most financial advisors recommend not delaying unless there's a specific reason.
What happens if you miss it
The penalty used to be 50% of the amount you failed to withdraw. Under SECURE 2.0 (2023), that dropped to 25% — and if you correct the mistake in a timely way, it drops further to 10%.
It's still a significant penalty. Missing an RMD is one of the more expensive mistakes in retirement planning, mostly because it's easy to forget and nobody sends you a reminder.
What to do with the money
You can spend it, reinvest it in a taxable brokerage account, give it away, or donate it. The IRS only requires the withdrawal — it doesn't specify what you do with it afterward.
One option worth knowing: a Qualified Charitable Distribution (QCD). If you're 70½ or older, you can transfer up to $105,000 per year directly from your IRA to a qualified charity. The amount counts toward your RMD but doesn't show up as taxable income.
For people who don't need the RMD money and give to charity anyway, this is often the most tax-efficient approach.
If you have multiple accounts
If you have multiple Traditional IRAs, you calculate the RMD separately for each account — but you can take the total from any one of them or split it however you want.
For 401(k)s, it's different. Each 401(k) requires its own separate RMD withdrawal from that specific account.
Roth conversions before 73
Some people convert traditional IRA money to a Roth IRA in their 60s — before RMDs kick in — to reduce future RMD amounts. You pay taxes on the converted amount now, but the Roth balance doesn't generate RMDs.
Whether this makes sense depends on your current tax bracket versus your expected bracket in retirement. A tax advisor can model both scenarios.
The short version
You turn 73. The IRS requires you to start withdrawing from your tax-deferred retirement accounts. The amount is based on your account balance and a life expectancy factor from their table. Miss it, and you pay a penalty.
The math isn't complicated. The timing is what trips people up.
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