Required Minimum Distributions (RMDs) are mandatory annual withdrawals from traditional IRAs, 401(k)s, 403(b)s, and most other pre-tax retirement accounts. The IRS created RMDs to ensure that tax-deferred retirement accounts eventually get taxed — you cannot keep money in a traditional IRA forever.

When RMDs Begin

Under the SECURE 2.0 Act (effective 2023), RMDs begin at age 73. If you turn 73 in 2024 or later, your first RMD is due by April 1 of the year after you turn 73. Subsequent RMDs are due by December 31 each year. Important: if you delay your first RMD to April 1, you'll take two RMDs that year (one for the prior year, one for the current year), which could push you into a higher bracket.

How RMDs Are Calculated

RMD = Account Balance (December 31 of prior year) ÷ Life Expectancy Factor

The Life Expectancy Factor comes from the IRS Uniform Lifetime Table. At age 73, the factor is 26.5. An IRA worth $1,000,000 at year-end produces an RMD of $1,000,000 ÷ 26.5 = $37,736 in the following year.

The factor decreases each year (25.5 at 74, 24.6 at 75, and so on), meaning the RMD percentage of your remaining balance increases over time. By age 80, you're withdrawing roughly 5.3% of the account per year. By age 90, roughly 8.8%.

The Tax Problem: RMD Stacking

RMDs are taxed as ordinary income in the year received. For someone with Social Security, a pension, and a large IRA, RMDs can push total income into the 22%, 24%, or even 32% bracket. They can also trigger IRMAA surcharges (higher Medicare Part B and D premiums), increase the taxable portion of Social Security income, and affect eligibility for other income-sensitive benefits.

The best time to address this is before RMDs begin — through Roth conversions in the years between retirement and age 73.

Strategies to Reduce RMDs

  • Roth conversions: Converting traditional IRA balances to Roth before 73 reduces the account subject to RMDs. Roth IRAs have no RMD requirement for the original account holder.
  • Qualified Charitable Distributions (QCDs): After age 70½, you can donate up to $105,000/year directly from an IRA to a qualifying charity. This satisfies your RMD without the amount appearing as taxable income.
  • Work delay: If you're still working at 73, you can delay RMDs from your current employer's 401(k) — though not from IRAs or old 401(k)s.

Penalty for missed RMDs: 25% of the amount that should have been withdrawn (reduced to 10% if corrected promptly). This is one of the steepest penalties in the tax code. Use the WealthSerene RMD Calculator to project your distributions from 73 to 90 and identify your total tax exposure.