After years of saving in tax-deferred retirement accounts, there eventually comes a time when the IRS requires you to begin taking money out. These withdrawals, known as required minimum distributions (RMDs), generally must be taken annually from certain retirement accounts once you reach the applicable starting age.
While the rules may seem straightforward, RMDs can have implications beyond simply meeting an annual requirement. They can increase your taxable income, potentially affect Medicare premiums and interact with other financial decisions, including charitable giving and Roth conversions.
Understanding how RMDs work and how they fit into your broader financial plan can help you make more informed decisions about retirement income.
What Are Required Minimum Distributions (RMDs)?
A required minimum distribution is the minimum amount you generally must withdraw each year from certain tax-deferred retirement accounts once you reach the applicable starting age. RMDs are designed to eventually move money out of accounts that have benefited from years of tax-deferred growth.
When Do RMDs Start?
The age at which RMDs begin depends on your birth year and the type of retirement account involved. Under current law, RMDs generally begin at age 73 for individuals born between 1951 and 1959. For individuals born in 1960 or later, the starting age increases to 75.
Which Retirement Accounts Require RMDs?
RMD rules generally apply to traditional IRAs, SEP IRAs, SIMPLE IRAs and many employer-sponsored retirement plans, including 401(k), 403(b) and 457(b) plans.
Roth IRAs are not subject to RMDs during the original account owner’s lifetime, and designated Roth accounts within employer-sponsored plans are also no longer subject to lifetime RMDs for the original account owner.
Different rules apply to inherited retirement accounts, with distribution requirements depending on factors such as the type of account, when the original account owner died and the beneficiary’s relationship to the original account owner.
How Are RMDs Calculated?
The amount you are required to withdraw is generally calculated using your retirement account balance as of December 31 of the previous year and an IRS life-expectancy factor.
Annual RMD = Prior December 31 account balance ÷ Applicable IRS life-expectancy factor
A different life-expectancy table may apply if your spouse is your sole beneficiary and is more than 10 years younger than you.
Your financial institution may calculate an RMD for you, but the account owner is ultimately responsible for making sure the correct amount is distributed.
While the calculation itself may be relatively straightforward, deciding how an RMD fits into your tax, income and charitable planning can require more thought.
When Is the RMD Deadline?
For most people already taking RMDs, the annual deadline is December 31.
There is an exception for your first RMD. You generally may delay your first required distribution until April 1 of the following year. However, doing so means you will also need to take your second RMD by December 31 of that same year.
Taking two RMDs in one calendar year could increase your taxable income and potentially affect other areas of your financial plan. For that reason, delaying your first RMD isn’t necessarily the best choice simply because the option is available.
How Can RMDs Affect Taxes and Medicare Premiums?
RMDs from traditional retirement accounts are generally taxed as ordinary income, except for any portion attributable to after-tax basis or other amounts that are not taxable.
An RMD may increase your taxable income enough to affect your marginal tax bracket, the taxation of Social Security benefits or future Medicare premiums.
Medicare Part B and Part D premiums may include an income-related monthly adjustment amount (IRMAA) when modified adjusted gross income exceeds certain thresholds. Because traditional retirement account distributions generally increase taxable income, RMDs can contribute to the income used to determine future Medicare premiums.
RMDs should therefore be considered alongside other potential sources of taxable income, including Roth conversions, capital gains and business income.
RMD Planning: QCDs and Roth Conversions
If you are charitably inclined, a qualified charitable distribution (QCD) may allow you to satisfy some or all of your RMD while generally excluding the qualifying distribution from taxable income.
Individuals age 70½ or older may make qualified charitable distributions directly from an eligible IRA to qualifying charitable organizations. For 2026, the annual QCD limit is $111,000 per individual, although eligibility requirements and other limitations apply.
Roth conversions can also be part of the planning conversation. If you are required to take an RMD and also want to complete a Roth conversion, you generally must satisfy the RMD first. The RMD itself cannot be converted to a Roth IRA.
This is one reason Roth conversion planning may be particularly valuable in the years before RMDs begin.
RMD Planning Is About More Than the Minimum
Required minimum distributions may begin as an IRS requirement, but they can affect several areas of your financial life. How much taxable income your RMD creates, whether a QCD makes sense, how distributions may affect Medicare premiums and whether Roth conversions should be part of your longer-term strategy are all worth considering.
Rather than treating an RMD as a standalone annual transaction, consider how it fits into your retirement income, tax, charitable giving and estate planning strategies.
Your Modera advisor can help you evaluate how required distributions fit within your broader financial plan and coordinate with your tax professional when appropriate.
Frequently Asked Questions About RMDs
Can I delay RMDs if I’m still working?
Certain employer-sponsored retirement plans may allow participants who are still working to delay RMDs from that employer’s plan until retirement. Different rules may apply if you own more than 5% of the business sponsoring the plan.
Can I take more than my required minimum distribution?
Yes. An RMD represents the minimum amount you are required to withdraw. You can generally withdraw more if you need additional funds. However, withdrawing more than your RMD in one year does not reduce the amount you will be required to take in a future year.
Before taking substantially more than your RMD, consider the potential tax consequences and how the withdrawal fits into your broader retirement-income strategy.
Can I take my RMD from one IRA if I have several IRAs?
Generally, you must calculate the RMD separately for each traditional IRA you own. However, you may generally add those IRA RMD amounts together and take the total distribution from one IRA or a combination of your IRAs.
Different aggregation rules apply to employer-sponsored retirement plans. RMDs from most employer plans generally must be calculated and satisfied separately.
Can I have taxes withheld from my RMD?
Yes. Federal and, where applicable, state income taxes generally can be withheld from a retirement account distribution. Federal income tax withholding from retirement distributions may also offer a useful planning opportunity because withholding is generally treated as though it were paid evenly throughout the year for estimated-tax purposes.
For someone who discovers later in the year that estimated tax payments may be insufficient, increasing withholding from an RMD may help address a potential shortfall. Whether this strategy makes sense depends on your individual tax circumstances.
What can I do with my RMD if I don’t need the money?
If you don’t need the distribution for living expenses, you might reinvest the after-tax proceeds in a taxable investment account, add the money to cash reserves or use it to help family members.
If you are charitably inclined, consider whether a qualified charitable distribution made directly from your eligible IRA to a qualifying charity could satisfy some or all of your RMD. A QCD should be coordinated before taking the RMD amount you intend to satisfy through the charitable distribution.
How you use the distribution will depend on your goals and how those assets fit into your broader financial plan.
What happens if I forget to take my RMD?
Failing to take the full RMD by the applicable deadline can result in an excise tax on the amount that should have been withdrawn.
Under current rules, the excise tax is generally 25% of the shortfall and may be reduced to 10% if the mistake is corrected within the applicable correction period. In certain circumstances, the IRS may waive the penalty when a shortfall resulted from reasonable error and appropriate steps are taken to correct it.
If you discover a missed or insufficient RMD, addressing it promptly is important.
