Required minimum distribution (RMD) for IRAs and 401(k)s

Retirement plans, like IRAs and 401(k) plans, allow you to save for your future. However, after saving for your future, there comes a point when the IRS requires you to start withdrawing a certain amount on a yearly basis. Unfortunately, if you don’t follow the required minimum distribution rules, you might receive tax penalties for not starting to withdraw your money by a certain age.

Here is a list of the types of retirement savings plans under this rule:

• Traditional IRAs
• SEP IRAs
• SIMPLE IRAs
• 401(k) plans
• 403(b) plans
• 457(b) plans
• profit sharing plans
• other defined contribution plans

Related notes on minimum required distribution rules:

• The withdrawal rules are different for IRA beneficiaries (those who inherit an IRA). Review our inherited IRA article for details.
• Starting in 2024, Roth 401(k) and Roth 403(b) accounts have no RMDs for the original owner.

What is the Required Minimum Distribution (RMD) and the RMD rules?

The term “Required Minimum Distribution” refers to the amount you must withdraw from certain retirement plans once you reach a certain age. It sounds simple, but the details are important.

To take a closer look at the RMD requirements, let’s go over the specifics to clarify the following:

• What is the required minimum distribution age,
• Is it a requirement, and
• What is the required minimum distribution?

RMD Age – Required beginning date for your first RMD

The RMD age milestone—known as the Required Beginning Date (RBD)—is the age at which you must withdraw your first Required Minimum Distribution (RMD). The RMD rules which include the age at which you must withdraw the first distribution changed with the 2022 SECURE 2.0 Act, so it’s helpful to look at birthdates to know which timeline to follow for your 401(k) or Traditional IRA withdrawals.

If you were born:

• Before July 1, 1949: You should have taken your first RMD in the year you turned 70½. You could have delayed the first RMD that year, but then you should have taken it by April 1 of the year after you reached age 70½.
• Between July 1, 1949, and December 31, 1950: You should have taken your first RMD in the year you turned 72. You could have delayed the first RMD that year, but then you should have taken it by April 1 of the year after you reached age 72.
• Between January 1, 1951, and December 31, 1958: You can take your first RMD in the year you turn(ed) 73. You can delay the first RMD that year, but then you should take it by April 1 of the year after you reach age 73.
• January 1, 1959, or after: You can take your first RMD in the year you turn 75. You can delay the first RMD that year, but then you need to take it by April 1 of the year after you reach age 75.

After your first RMD, you’ll need to take an annual RMD by December 31 to stay in line with the rules.

For this reason, keep in mind, if you don’t take an RMD in that first year and opt to take it by April 1 of the next year, you’ll have to take two distributions the next year.

First-year RMD exception for certain plans: If you are still working when you reach your Required Beginning Date, you may delay your first RMD but only for an employer-sponsored plan for your current job. You may not delay RMDs for IRAs or for other employers’ plans.

Is RMD a requirement?

Unfortunately, required minimum distributions are not optional—and come at a price if you don’t take them. In fact, if you don’t take or forget to take the minimum amount each year, you’ll likely have a 25% penalty on your hands for the amount not distributed (the penalty was 50% for tax year 2022 and before).

Let’s say your RMD amount for last year was $5,000, but you only took out $4,000. That means you had another $1,000 left to withdraw—that amount is subject to the 25% penalty. In other words, you’d lose $250 (25% of the $1,000) to the Required Minimum Distribution penalty.

You may request a waiver of the penalty if not taking an RMD was due to reasonable error on your part, and you have taken steps to remedy the situation. Also, the 25% penalty may be reduced to 10% if you address the issue (that is, take a corrective distribution) within a certain timeframe (generally, by the end of the second year following the year of the missed RMD amount).

Don’t worry though—as long as you stay in line with the rules, you’re in the clear! Take out that hard-earned retirement money you’ve been saving for decades—you deserve to have a little fun in your yesteryears.

How to calculate your RMD for the tax year

As noted earlier, the Required Minimum Distribution is the minimum amount you must withdraw from your IRA, SIMPLE IRA, SEP IRA, or retirement plan account(s). To figure out how to calculate Required Minimum Distribution amounts, you divide the owner’s retirement account balance by the applicable distribution period or life expectancy factor.

The owner’s amount balance is the total amount available in the owner’s retirement account as of December 31 of the previous tax year. Overall, there are three life expectancy tables for RMD calculations, depending on the owner’s age, whether the retirement account owner is still alive and/or who the designated beneficiary is (surviving spouse, trust or estate, etc.):

• Table I – Single Life Expectancy Table – for beneficiaries inheriting an account.
• Table II – Joint Life and Last Survivor Table – for account owners with a spouse more than 10 years younger who is the sole beneficiary.
• Uniform Lifetime Table (Table III) – For account owners who are still alive and, if married, whose spouse:
  • Isn’t the sole designated beneficiary, or
  • is the sole designated beneficiary and not more than 10 years younger than the IRA owner.

While not the official term, people sometimes think of these as RMD tables or even as the IRA Required Minimum Distribution table although they apply to more than IRAs (as noted above). In this article, we will refer to the Uniform Lifetime Table (Table III) to calculate your RMD for 2024 as the retirement account owner. To determine the applicable life expectancy factor, refer to the number next to your age as of your birthday in 2024. You can find all three tables on the IRS website.

Uniform Lifetime Table (RMD Table 2024)

Table III – Uniform Life

For Use by: Unmarried Owners, Married Owners Whose Spouses Aren’t More Than 10 Years Younger, and Married Owners Whose Spouses Aren’t the Sole Beneficiaries of Their IRAs.

Source: Source: Internal Revenue Service (IRS)

Once you determine your distribution period, you can do the RMD calculation for each of your IRA and employer retirement accounts separately. For IRAs, you can take the total traditional IRA RMD amount from just one IRA account or from several of them, as long as your total distributions are at least as much as the total RMDs for all IRA accounts. However, for Employee Retirement plans, like 401(k) plans, the required minimum distributions should be taken separately from each account.

For example, Joe, who turned 74 in the current tax year, has four retirement accounts (two IRAs and two 401(k)s). The account balances for each account as of December 31 of the previous tax year were: (1) IRA – $102,000, (2) IRA – $51,000, (3) 401(k) – $204,000, and (4) 401(k) – $306,000. Joe must determine the RMD for each account by dividing each account balance by the distribution period for taxpayers who are 74 in the current tax year. Referring to the Uniform Lifetime Table, Joe’s distribution period is 25.5. The RMD for each account is calculated as follows:

• IRA: $102,000 divided by 25.5 equals $4,000
• IRA: $51,000 divided by 25.5 equals $2,000
• 401(k): $204,000 divided by 25.5 equals $8,000
• 401(k): $306,000 divided by 25.5 equals $12,000

For the current tax year, Joe may withdraw a total of $6,000 from either or both IRA accounts combined for his minimum IRA distribution per the IRA RMD rules. However, Joe must withdraw $8,000 and $12,000 from his respective 401(k) accounts separately to account for his 401(k) minimum distribution. You don’t need to take an equal amount of distribution over a period of 12 months, you can take the RMDs all at once in one day in the year or spread them out over several distributions within the tax year (This applies to 401(k) and IRA required minimum distributions).

Furthermore, you can withdraw more than the required minimum distribution. The RMD amount only represents the bare minimum you must withdraw so you don’t pay IRS penalties. However, the additional amount cannot be credited to determine the minimum for the following years.

Some banks and investment plans will offer automatic options, so you don’t have to remember to request the required minimum distribution.

Your withdrawals will be included in your taxable income except for any portion that was already taxed when you made the contributions, but any earnings on those contributions will be taxed.

What if you don’t need the money to live off of in a specific tax year? Is a rollover a possibility for avoiding a penalty? Unfortunately, no. Required minimum distributions aren’t eligible for rollovers.

Need help with Required Minimum Distribution rules?

Understanding RMD rules can get tricky, but it’s important to know you’re following them so you can avoid costly penalties.

Whether you choose to file with a tax pro or file with H&R Block Online, you can rest assured that we’ll get you the biggest refund possible.