What are Required Minimum Distributions and how do they affect me?
David TalleyUpdated December 10, 2025
Quick Answer
RMDs are mandatory annual withdrawals from traditional retirement accounts starting at age 73. The amount is calculated by dividing your account balance by an IRS life expectancy factor. RMDs can push you into higher tax brackets and affect Medicare premiums. Strategic planning before RMDs begin can reduce their lifetime tax impact.
RMDs are one of those things that surprise people—you've deferred taxes for decades, and now the IRS wants its share.
The basics:
- Required Minimum Distributions start at age 73 (moving to 75 in 2033)
- Apply to traditional IRAs, 401(k)s, 403(b)s, and most employer plans
- Do NOT apply to Roth IRAs (huge advantage)
- Penalty for missing RMDs: 25% of the amount not withdrawn
How they're calculated:
Divide your December 31 account balance by an IRS life expectancy factor. At 73, that factor is about 26.5, meaning you withdraw roughly 3.8%. The percentage increases each year as your life expectancy shrinks.
Why RMDs matter:
If you've been a good saver, RMDs can be substantial. Someone with $2 million in traditional accounts might face an $80,000+ RMD—on top of Social Security and any other income. That can:
- Push you into higher tax brackets
- Increase Medicare premiums (IRMAA)
- Make more Social Security taxable
- Reduce tax-efficient investment positioning
The planning opportunity:
The years between retirement and RMDs are golden. Consider:
- Roth conversions to reduce future traditional balances
- Strategic withdrawals to "smooth" income over time
- Charitable giving from IRAs (Qualified Charitable Distributions)
QCDs—the secret weapon:
After age 70½, you can donate up to $105,000/year directly from your IRA to charity. It satisfies your RMD but isn't included in taxable income. If you're charitably inclined, this is powerful.
Bottom line:
RMD planning isn't something to think about at 72. The best strategies start years earlier.
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