Required Minimum Distribution (RMD)

An RMD is the slice of your tax-deferred accounts the IRS makes you withdraw each year once you hit 73 or 75. It's taxable income, and for large balances it's a tax bill you can see coming years ahead.

When does the IRS finally collect the taxes you spent decades deferring? The year you turn 73, ready or not. A Required Minimum Distribution is the slice of your tax-deferred savings the government makes you withdraw every year, whether you need the money or not.

What it applies to

Traditional IRAs, SEP and SIMPLE IRAs, and most workplace plans like 401(k)s and 403(b)s. Not Roth IRAs while you’re alive, and since 2024 not the Roth money inside a workplace plan either. The logic is simple. Those dollars grew untaxed for thirty years, and the RMD is the bill coming due.

When it starts

Under the SECURE 2.0 Act, your start age depends on your birth year:

Born 1951 to 1959: RMDs begin at 73.
Born 1960 or later: RMDs begin at 75.

You can push your first RMD to April 1 of the following year. I’d think hard before doing it. Take that deferral and you land two RMDs in one calendar year, which stacks the income and usually the tax.

How it’s calculated

Take your account balance from December 31 of the prior year and divide by a factor from the IRS Uniform Lifetime Table. Older age, smaller factor, larger forced withdrawal.

Say you’re 73 with $1,000,000 in a traditional IRA. The factor for age 73 is 26.5:

$1,000,000 ÷ 26.5 ≈ $37,736

Every dollar of that lands on your tax return as ordinary income.

The part most people miss

Most people treat the RMD as a chore they handle each spring. The expensive mistake is not seeing it for what it really is: a rising tax bill you could read a decade in advance. The balance compounds, the factor shrinks, and the forced income climbs right when it can tip you into a higher bracket and raise your Medicare premiums two years later through IRMAA, the income-based surcharge on Medicare.

If your accounts are large

The fix starts years before the first RMD, not during it. Roth conversions in your 60s, while your income is low and before RMDs begin, shrink the balance that gets divided later. Once RMDs start, a Qualified Charitable Distribution sends the money straight to charity and keeps it off your return. Neither one works as a December scramble.

The RMD is rare among tax bills. It tells you it’s coming, decades ahead. The whole game is to listen.