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The IRS wants its share. After decades of tax-deferred growth, RMDs force withdrawals from your retirement accounts. Here's how to handle them strategically.
Required Minimum Distributions are mandatory annual withdrawals the IRS requires from tax-deferred retirement accounts (Traditional IRAs, 401(k)s, 403(b)s, TSP) once you reach a certain age. The government gave you a tax break going in — now they want their revenue.
73
Starting Age
Born 1951–1959
75
Born 1960+
SECURE 2.0 Act
25%
Penalty for Missing
Of amount not withdrawn
None
Roth IRA RMDs
No RMDs for original owner
The 25% Penalty
The formula is straightforward but must be recalculated every year using updated account balances and the IRS Uniform Lifetime Table:
RMD = Account Balance (Dec 31) ÷ Life Expectancy Factor
Example: $500,000 balance ÷ 26.5 (age 73 factor) = $18,868 minimum withdrawal
Annual RMD Amount ($500K Balance, Increasing with Age)
Why RMDs Increase
RMD Requirements by Account Type
| Feature | Subject to RMDs | NO RMDs Required |
|---|---|---|
| Traditional IRA | Yes, at 73/75 | — |
| Traditional 401(k)/403(b) | Yes, at 73/75 | — |
| SEP IRA | Yes, at 73/75 | — |
| Roth IRA (original owner) | — | No RMDs ever! |
| Roth 401(k) | Not anymore (2024+) | No RMDs (SECURE 2.0) |
| Inherited IRAs | Yes (10-year rule) | — |
Smart planning in the years before RMDs begin can save you hundreds of thousands in lifetime taxes:
Roth Conversion Window
Convert Traditional IRA to Roth in low-income years. Pay tax now at a lower rate to avoid forced higher-rate withdrawals later.
Plan Your First RMD
Your first RMD is due by April 1 of the year AFTER you turn 73. But delaying means 2 RMDs in one year (double tax hit).
Take RMDs by Dec 31
After the first year, all RMDs are due by December 31. Set up automatic distributions so you never miss.
QCD Strategy
Qualified Charitable Distributions: donate RMD directly to charity (up to $105,000/yr). It satisfies RMD without counting as income.
Coordinate with SS & Pension
Stack RMDs with Social Security and pension to stay below IRMAA thresholds that increase Medicare premiums.
The gap between retirement and age 73 is your golden window for Roth conversions. If income is low (before Social Security and RMDs kick in), you can convert at a lower tax bracket:
Fill Lower Tax Brackets
Convert just enough to fill the 12% or 22% bracket each year. Don't trigger a higher bracket unnecessarily.
Reduce Future RMDs
Every dollar converted to Roth is a dollar that will NEVER require RMDs. Shrink your Traditional balance now.
Roth Grows Tax-Free Forever
Converted amounts grow and withdraw completely tax-free. Your heirs also receive it tax-free (though subject to 10-year rule).
Watch IRMAA Thresholds
Medicare Part B/D premiums spike at income breakpoints. Plan conversions to stay just below ($103K single, $206K married).
The Math Wins
If you donate to charity, Qualified Charitable Distributions are the most tax-efficient way to give:
Key Takeaways