What Are Required Minimum Distributions, or RMDs?

What are RMDs?

RMDs are required minimum distributions, the minimum amount you must withdraw from your retirement account each year by Dec. 31.

The IRS spends a lot of energy making sure people don’t tap their retirement accounts early, imposing taxes and penalties on most early withdrawals. But at a certain age, the agency will force you to take money out of your retirement account. These distributions are primarily enforced on tax-deferred retirement accounts.

This includes workplace plans such as 401(k)s and 403(b)s, as well as traditional individual retirement accounts and self-employed retirement plans, including SIMPLE and SEP IRAs. Starting in 2024, certain non-IRA Roth accounts will no longer require RMDs.

Required minimum distribution (RMD) rules

You’ll note one account missing from the list above: Roth IRAs don't require RMDs while the account holder is alive. But if you’ve inherited a Roth IRA, you might be required to take distributions.

The RMD age was previously 70½, and later raised to 72 in 2019. SECURE Act 2.0, legislation signed into law in December 2022, increased this again to age 73 in 2023 and 75 in 2033. There are a few other changes to note:

• Individuals who turned 72 in 2022 still need to take their first RMD by April 1, 2023. They are not affected by the SECURE Act 2.0 changes.

• Currently, the penalty for failing take an RMD is 50%. In 2023, this will decrease to 25% of the RMD amount. However, if corrected in a timely fashion in 2023, this amount will drop to 10% for IRAs.

• Starting in 2024, Sec. 325 of SECURE Act 2.0 also eliminates RMDs for non-IRA Roth accounts. This includes Roth 401(k) plans, Roth 403(b) plans and governmental Roth 457(b) plans.

Other important things to know: You can always withdraw more than the minimum — this is a floor, not a ceiling — and unless the money you withdraw was already taxed, these distributions will be taxable as income in the year you take them. In other words, this is an opportunity for the IRS to start collecting those taxes you’ve been able to defer.

How RMDs are calculated

RMDs are calculated via some easy math — just kidding! This is the IRS we’re talking about.

To calculate your retired minimum distribution for the current year, divide your account balance at the end of the last year by a distribution period that is based on your age. Those periods are available in two tables:

• If you’re married, the sole beneficiary of your account is your spouse, and if he or she is more than 10 years younger than you, you will use the Joint and Last Survivor Table.

• All other original IRA owners will use the Uniform Lifetime Table to calculate their withdrawals.

Your account provider may also help you calculate RMDs.

RMDs when you have multiple accounts

If you have more than one retirement account that's subject to RMDs, you’ll have to calculate the distribution for each account separately. However, if you have more than one IRA, the IRS allows you to take your total IRA RMD from just one of them.

The same rule applies if you have more than one 403(b) plan. But if you have multiple 401(k)s or 457(b)s, you must pull an RMD from each account separately.

If you need help staying on top of accounts and maximizing your retirement plan, you may want to find an advisor that suits your needs.