Required Minimum Distribution, better known as RMDs, are mandatory withdrawals you have to take from certain retirement accounts once you reach a specific age. These aren’t optional, the IRS requires you to take RMDs.

If you’ve been saving in tax-deferred accounts like traditional IRAs, SEP IRAs, or 401(k)s, you haven’t paid taxes on that money yet. RMDs are the IRS’s way of finally collecting. We’re here to break it all down in a way that’s easy to understand and plan for, so you’re not hit with unexpected taxes or penalties.

 

When Do RMDs Start?

As of 2024, most people must start taking Required Minimum Distributions (RMDs) at age 73. But if you were born in 1960 or later, your RMDs begin at age 75.

This change comes from the SECURE 2.0 Act, which gradually increased the RMD age to give retirees more time for their investments to grow.

In short:

• Born between 1951 and 1959? Your RMDs start at 73.
• Born in 1960 or later? They start at 75.

 

Which Retirement Accounts Require RMDs?

Not all retirement accounts are subject to Required Minimum Distribution (RMD) rules, but most tax-deferred accounts are. Traditional IRAs, SEP IRAs, SIMPLE IRAs, traditional 401(k)s, 403(b)s, 457(b)s, and inherited IRAs—including inherited Roth IRAs—are all subject to RMDs. On the other hand, some accounts are exempt. Roth IRAs, as long as you’re the original owner, do not have RMDs during your lifetime. Roth 401(k)s used to require RMDs, but starting in 2024, that requirement has been eliminated. So, if you’ve been contributing heavily to a traditional IRA or 401(k), it’s important to know that RMDs will become a part of your financial picture once you reach the required age.

 

How Are RMDs Calculated?

Your Required Minimum Distribution (RMD) is determined by taking your retirement account balance as of December 31 of the previous year and dividing it by a life expectancy factor set by the IRS. This factor is based on your age and comes from a chart known as the Uniform Lifetime Table.

The formula looks like this:

RMD = Account Balance ÷ Life Expectancy Factor

For example, if you’re 75 and your IRA had a balance of $500,000 at year-end, and the IRS factor for your age is 24.6, your RMD for the year would be:

$500,000 ÷ 24.6 = $20,325.20

Things can get more complicated if you have multiple retirement accounts or if you’ve inherited an account, as different rules may apply. That’s where strategic planning—and working with a knowledgeable advisor—can really make a difference in optimizing your withdrawals and avoiding unnecessary taxes.

 

Can You Delay or Skip RMDs?

If you just turned RMD age this year, you can delay your first RMD until April 1 of the following year but there’s a catch. You’ll still need to take your second RMD by December 31 of that same year. That means two taxable withdrawals in one year, which could spike your income and increase your tax bracket.

Also, if you’re still working past age 73 and have a 401(k) with your current employer, you may be able to delay RMDs from that account (but not from IRAs or previous 401(k)s).

Inherited accounts? The rules are stricter. Most non-spouse beneficiaries have to drain inherited accounts within 10 years, and may need to take annual RMDs depending on the situation.

 

What Happens If You Miss an RMD?

If you miss taking your RMD or don’t withdraw enough, the IRS can penalize you up to 25% of the amount you failed to withdraw. That’s one of the steepest penalties in the entire tax code.

Fortunately, the IRS recently reduced the penalty from 50% to 25%, and it can go as low as 10% if the error is corrected promptly. But still, why risk it? Staying on top of your RMDs is crucial for avoiding unnecessary tax headaches.

 

How Do RMDs Affect Your Taxes?

RMDs are generally taxed as ordinary income in the year you withdraw them. That means they get added to your other income and can affect your overall tax liability, possibly even pushing you into a higher tax bracket.

And it doesn’t stop there. RMDs can also:

• Increase your Medicare premiums
• Trigger or increase taxes on your Social Security
• Affect your eligibility for tax credits or deductions

This is why tax planning around RMDs is so important. Without it, you could unintentionally pay more than necessary.

 

Are There Strategies to Reduce RMD Impact?

At Tavola Group, helping clients reduce the tax impact of Required Minimum Distributions (RMDs) is one of our specialties.

Common strategies include Roth conversions, which eliminate future RMDs and allow for tax-free growth, and Qualified Charitable Distributions (QCDs)—tax-free donations from your IRA that count toward your RMD if you’re 70½ or older. We also guide clients through strategic withdrawals in their 60s to lower future RMDs and help align RMDs with living expenses in a tax-efficient way. Every plan is personalized because your income, goals, and tax situation are unique.

 

What If You Inherit a Retirement Account?

If you inherit a retirement account, the required minimum distribution (RMD) rules depend on your relationship to the original account holder and when they passed away.

Spouses have the most flexibility. They can roll the funds into their own IRA or treat it as an inherited IRA, whichever works better for their situation.

Non-spouse beneficiaries, like children, usually fall under the 10-year rule. That means the account must be fully distributed within 10 years of the original owner’s death.

In some cases, annual RMDs are still required during that 10-year period. This depends on the account holder’s age and the timing of their death.

Inherited Roth IRAs also follow the 10-year rule. But since distributions are typically tax-free, the impact is often less significant.

 

Ready to Plan Smarter? Book a Free Tax Planning Consultation

RMDs aren’t just a box to check. They’re a key part of your tax and retirement strategy. When handled correctly, they can help you reduce taxes, maintain cash flow, and even support charitable causes.

At Tavola Group, we help individuals and business owners make smart, tax-efficient decisions around RMDs, retirement income, and more. We simplify the process and create a clear strategy that supports both your short-term needs and long-term goals.

If you’re nearing RMD age, or already there, and want a second opinion, let’s talk. We offer complimentary tax planning consultations to help you get the most from your retirement income, minimize taxes, and avoid costly mistakes.

Click here to book your free tax review. Let’s make retirement feel more like freedom.