Required minimum distributions can become an important part of retirement planning once you reach the applicable RMD age. These IRS rules generally require you to begin withdrawing money from certain tax-deferred retirement accounts, even if you do not need the funds for current expenses.
Understanding when RMDs begin, how they are calculated, and which accounts are affected can help you plan ahead. Additionally, careful coordination may help you avoid missed deadlines, unexpected taxes, and potential IRS penalties.
Quick Answer: What Is an RMD?
A required minimum distribution, or RMD, is the minimum amount the IRS generally requires you to withdraw each year from certain retirement accounts once the applicable rules take effect.
RMDs commonly apply to:
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k) plans
- 403(b) plans
- Certain 457(b) plans
- Other qualified retirement plans
Roth IRAs do not require distributions during the original owner’s lifetime. Additionally, designated Roth accounts in employer plans, such as Roth 401(k) and Roth 403(b) accounts, are no longer subject to lifetime RMDs for the account owner.
When Do Required Minimum Distributions Begin?
Your RMD starting age depends on your birth year.
Under current law:
- If you were born from 1951 through 1959, your applicable RMD age is generally 73.
- If you were born in 1960 or later, the applicable age is generally 75.
For an IRA, your first required minimum distribution is generally due by April 1 of the year after the year you reach the applicable RMD age. After that, annual RMDs are generally due by December 31.
For example, someone who turned 73 during 2025 generally has until April 1, 2026, to take the 2025 RMD.
However, delaying that first distribution can mean taking two taxable RMDs during the following calendar year: the delayed first distribution by April 1 and the next year’s distribution by December 31. Therefore, timing deserves careful consideration.
Do Workplace Retirement Plans Follow the Same Rules?
Not always.
For some employer-sponsored retirement plans, such as a 401(k), the required beginning date may be April 1 following the later of:
- The year you reach the applicable RMD age, or
- The year you retire.
However, the plan itself may require distributions earlier. In addition, the delayed-start rule generally does not apply to someone who owns more than 5% of the business sponsoring the plan.
As a result, retirees should not assume that every account follows exactly the same starting date.
How Is an RMD Calculated?
Generally, an RMD is calculated by dividing the retirement account’s balance as of December 31 of the previous year by the applicable life expectancy factor published by the IRS.
The basic formula is:
Prior December 31 account balance ÷ IRS life expectancy factor = RMD
However, the appropriate IRS table can depend on your circumstances. For example, a different table may apply if your spouse is your sole beneficiary and is more than 10 years younger than you.
Although a financial institution or retirement plan administrator may provide an RMD calculation, the account owner is ultimately responsible for satisfying the applicable distribution requirement.
Can You Take One RMD From Multiple IRAs?
In some situations, yes.
If you own multiple traditional IRAs, you generally calculate the required minimum distribution for each IRA separately. However, you may be able to satisfy the combined IRA requirement by withdrawing the total from one IRA or by splitting withdrawals among multiple IRAs.
Employer retirement plans generally work differently. The IRS states that RMD requirements for retirement plans generally must be satisfied separately for each plan.
Therefore, avoid assuming that a withdrawal from one type of retirement account automatically satisfies the requirement for another.
What About Multiple 403(b) Accounts?
403(b) plans have special RMD rules that can differ from other employer-sponsored plans.
Additionally, certain amounts contributed to a 403(b) before 1987 may receive different treatment if those amounts were properly accounted for. The IRS advises participants to check with the employer, plan administrator, or provider regarding those older balances.
Because older retirement plans can have unique provisions, reviewing account history may be especially important for longtime 403(b) participants.
What Happens If You Miss an RMD?
Missing a required minimum distribution can result in an IRS excise tax on the amount that should have been withdrawn.
Under current rules, the excise tax may be 25% of the RMD shortfall. However, that amount may be reduced to 10% when the shortfall is corrected within the applicable correction period.
For example, if a required distribution was $20,000 and none of it was taken, the potential excise tax could be significant.
Therefore, keeping track of RMD deadlines should become part of your annual retirement planning process.
Can an RMD Penalty Be Corrected?
Depending on the circumstances, relief may be available when an RMD was missed because of a reasonable error and the account owner takes steps to correct it.
IRS Form 5329 is used to report certain additional taxes related to retirement plans and IRAs, including RMD shortfalls. Because individual circumstances can vary, consider consulting a qualified tax professional if you discover a missed or insufficient distribution.
Acting promptly can be especially important because correction timing may affect the applicable excise tax.
Are Required Minimum Distributions Taxable?
RMDs from tax-deferred retirement accounts are generally included in taxable income, except to the extent a distribution represents amounts that were previously taxed.
Consequently, required minimum distributions can affect more than your retirement account balance. They may also influence your overall taxable income and other parts of your financial picture.
That is one reason RMD planning should not begin the week before December 31. Instead, consider your anticipated distributions as part of your broader annual retirement and tax planning.
For additional financial planning and retirement education, visit the Holland Strategic Wealth Advisors blog.
Can You Take More Than Your Required RMD?
Yes. An RMD represents a minimum withdrawal, not a maximum.
You can generally withdraw more from a retirement account if the plan or account permits it. However, taking more than your required minimum distribution in one year does not reduce a future year’s RMD.
For example, if your RMD is $20,000 and you withdraw $30,000, the additional $10,000 generally cannot be carried forward and credited toward next year’s requirement.
Can an RMD Be Rolled Into Another Retirement Account?
Generally, no.
A required minimum distribution is not eligible to be rolled over into another tax-deferred retirement account. Therefore, you typically must remove the RMD before completing an otherwise eligible rollover involving retirement plan assets.
This distinction can become particularly important when consolidating retirement accounts or moving money between custodians.
Why RMD Timing Matters
The December 31 deadline may make RMD planning seem like an end-of-year task. However, waiting until the final weeks of the year can create unnecessary complications.
Processing delays, holidays, paperwork requirements, account restrictions, or incomplete instructions can all slow a distribution.
Instead, consider reviewing your RMD status earlier in the year. Doing so gives you more time to confirm:
- Which accounts have RMD requirements
- How much must be withdrawn
- Which accounts will fund the distributions
- Whether taxes should be withheld
- Whether distributions have already occurred
- Whether any additional amount is still required
Additionally, an annual review can help prevent accidentally assuming that a withdrawal from one account satisfied an obligation for another.
Should You Set Up Automatic RMD Withdrawals?
Automatic distributions can help some retirees stay ahead of annual deadlines.
Depending on the account custodian, you may be able to schedule monthly, quarterly, or annual withdrawals. However, you should still confirm that the total amount distributed satisfies the year’s requirement.
Account balances, IRS factors, and personal circumstances can change. Therefore, an automatic distribution should not replace an annual RMD review.
RMDs and Retirement Income Planning
Required minimum distributions are more than an IRS compliance issue. They can also affect how you create income throughout retirement.
For example, distributions may interact with:
- Social Security income
- Pension income
- Investment withdrawals
- Estimated tax payments
- Medicare-related income considerations
- Charitable and estate planning
- Your overall retirement cash flow
As a result, deciding when and how to take a required distribution may deserve more thought than simply withdrawing the minimum amount at year-end.
A coordinated retirement income strategy can help you understand how required distributions fit alongside your other assets and income sources.
Create an Annual RMD Review Process
Once required minimum distributions apply to you, consider making an RMD review part of your annual financial routine.
Your checklist might include:
- Confirm your RMD-eligible accounts.
- Review prior December 31 balances.
- Verify the required amount for each account.
- Confirm which distributions have already occurred.
- Review federal and state tax withholding.
- Schedule any remaining withdrawals well before year-end.
- Keep records showing that the requirement was satisfied.
Meanwhile, if you change custodians or consolidate accounts during the year, confirm how those transactions affect your distribution responsibilities.
A little organization can make the process much easier.
Frequently Asked Questions About Required Minimum Distributions
What are required minimum distributions?
Required minimum distributions are minimum annual withdrawals generally required from certain tax-deferred retirement accounts once the account owner reaches the applicable RMD age or otherwise meets the plan’s required beginning rules.
What age do RMDs start?
Under current law, the applicable age is generally 73 for people born from 1951 through 1959 and 75 for people born in 1960 or later. Employer-sponsored plans may have additional rules, including a potential exception for certain employees who are still working.
Are Roth IRAs subject to RMDs?
Roth IRAs generally do not require distributions during the original owner’s lifetime. In addition, designated Roth accounts in plans such as Roth 401(k)s and Roth 403(b)s are not subject to lifetime RMDs for the employee.
What happens if I take more than my RMD?
You may withdraw more than the required amount. However, excess distributions generally cannot be applied toward your required minimum distribution for a future year.
What happens if I forget to take an RMD?
An RMD shortfall may be subject to a 25% excise tax. The rate can potentially fall to 10% if the shortfall is corrected within the applicable correction period. If you miss a distribution, consider addressing it promptly and consulting a qualified tax professional.
Holland Strategic Wealth Advisors offers insurance products and services. We are not affiliated with any government agency and do not provide tax or legal advice. This information is for educational purposes only and should not be construed as advice or a recommendation specific to your situation. Investing involves risk, including possible loss of principal. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company.
