Required Minimum Distributions (RMDs) From Retirement Accounts

If you save and invest wisely, you can leave a substantial amount of money in an individual retirement account (IRA) or 401(k)—but eventually you, or your beneficiaries, will have to start taking money out. And you (or your beneficiaries) will be in for financial penalties if you violate the rules.

When Withdrawals Must Begin

The ideal scenario, in the eyes of the IRS, would be to have you exhaust the money in your retirement account at precisely the moment you breathe your last breath. That's why the IRS makes you start withdrawing money in your 70s, and why the amount of these required minimum distributions (RMDs) is tied to your statistical life expectancy.

Traditional IRAs. Distributions become mandatory the year you turn age 73 (effective in 2023). Previously, from 2020-2022, this age was 72, and prior to that, it was 70½. (In 2033, the age that mandatory RMDs begin will increase to 75.) The IRS bases everything on calendar years. You must make one whole year's withdrawal for the calendar year in which you turn 73. This first year, however, your deadline is slightly extended: You have until April 1 of the following year to make the withdrawal. After that, the deadline is always December 31.

EXAMPLE: Robert turns 73 on November 30, 2023. He must take a full year's required minimum distribution for 2023, but he has until April 1, 2024, to do it. He must take 2024's required minimum distribution by December 31, 2024.

Roth IRAs. There are no required distributions from Roth IRAs. As a result, a Roth IRA could contain a much larger amount at your death than a comparable traditional IRA or 401(k).

401(k) accounts. You don't have to withdraw money from your 401(k) until you turn 73 (effective 2023) or you actually retire, whichever is later. If you retire after you are 73, then April 1 of the year following your retirement is the date by which you must make your first required distribution.

Calculating the Required Minimum Distribution (RMD)

The minimum amount you must withdraw is based on your life expectancy and that of a theoretical beneficiary. The IRS provides a table on which you can look up this "joint life expectancy"; then you simply divide the amount in your account by this number and take out the result.

EXAMPLE: Valerie is 75; the IRS Uniform Distribution Period Table gives her a figure of 24.6 years. The balance in her IRA at the end of the previous calendar year was $50,000, so this year she must withdraw $2,032 ($50,000 divided by 24.6).

Whether or not you actually name a beneficiary, the IRS table assumes that your beneficiary is ten years younger than you are. You don't need to consider the beneficiary's actual age unless the beneficiary is your spouse and is in fact more than ten years younger than you. In that case, you can reduce the amount you must withdraw by using a different IRS table that factors in your spouse's actual age.

EXAMPLE 1: Jason turns 73 on February 23. That means by April 1 of the next calendar year, he must have made a year's worth of withdrawals from his IRA account. His wife Molly, the beneficiary of the IRA, is four years younger than he is. The minimum amount he must withdraw is determined by the IRS Uniform Distribution Table. The table assumes that Molly is ten years younger than Jason, which works to their benefit—the minimum amounts Jason must withdraw each year will be smaller than if Molly's actual life expectancy were used.

EXAMPLE 2: Mark names his wife Rita, who is 12 years his junior, as his IRA beneficiary. To calculate his required minimum distribution, he uses the IRS table that calculates his and Rita's joint life expectancy based on their actual ages.

Why You Don't Want to Miss a Required Distribution

If you don't make the legally required withdrawal, you will forfeit a quarter of the amount you should have withdrawn but did not. That's right: There's a full 25% penalty tax. If you take out the missed amount by the end of the second year after it was due, however, the penalty lowers to 10%. (Prior to the SECURE 2.0 Act, which became effective at the beginning of 2023, the penalty was a truly hefty 50% tax.)

EXAMPLE: When Mae is required to begin taking money from her IRA, she dutifully makes a withdrawal—but mistakenly takes out $1,000 less than she should have. The next year, when she files her income tax return, she must pay a $250 tax (and file an extra form) on the $1,000 she should have withdrawn. But if she takes out that missed $1,000 by the end of that next year (in addition to the RMDs for that year), the tax owed is only $100, or 10%.

More Information

To learn about your spouse beneficiary's options upon inheriting your retirement account, see Naming Your Spouse to Inherit Retirement Accounts. To learn about other beneficiaries' options, see Naming a Non-Spouse Beneficiary for Retirement Accounts.

The book IRAs, 401(k)s & Other Retirement Plans, by Twila Slesnick and John C. Suttle (Nolo), offers a thorough discussion of the rules that govern withdrawals from the most common kinds of retirement plans.

For the rules straight from the IRS, in all their complexity, see Retirement Topics: Required Minimum Distributions (RMDs).