If you have money sitting in a traditional IRA or 401(k), the government eventually wants its cut. Required Minimum Distributions — RMDs — are the IRS rule that forces you to start withdrawing from those tax-deferred accounts once you reach a certain age. The amounts are based on your account balance and life expectancy, and the penalties for missing a deadline are among the steepest in the tax code.
This matters for inflation-conscious retirees for a simple reason: RMDs are taxable income. A larger withdrawal pushes you into a higher bracket, can increase Medicare premiums, and can affect how much of your Social Security is taxed. Planning around RMDs is one of the most practical ways to protect your purchasing power in retirement.
What is a Required Minimum Distribution?
An RMD is the minimum amount you must withdraw from most tax-deferred retirement accounts each year after you reach your RMD age. You cannot leave the money in the account indefinitely — Congress gave you decades of tax-deferred growth, and RMDs are how the IRS collects.
The calculation is straightforward in concept: divide your prior-year-end account balance by a life expectancy factor from IRS tables. The older you get, the shorter the divisor, so the percentage you must withdraw rises each year.
Accounts that require RMDs:
- Traditional IRAs (including SEP and SIMPLE IRAs)
- 401(k), 403(b), and 457(b) plans
- Most other employer-sponsored retirement plans funded with pre-tax dollars
Accounts that generally do NOT require RMDs while you are alive:
- Roth IRAs (Roth 401(k)s also have no RMDs for the original account owner under current law)
- HSAs (as long as used for qualified medical expenses)
Inherited IRAs have their own, often stricter, RMD rules depending on when the original owner died and your relationship to them. Those rules changed significantly under the SECURE Act of 2019.
When do RMDs start?
Congress has pushed the starting age back twice in recent years:
| If you were born… | Your RMDs must begin by… |
|---|---|
| Before 1951 | Already required (age 72 or earlier) |
| 1951–1959 | April 1 of the year after you turn 73 |
| 1960 or later | April 1 of the year after you turn 75 |
Your first RMD can be delayed until April 1 of the year after you hit your RMD age. Every RMD after that is due by December 31 of that calendar year. Waiting until April 1 for your first distribution means you will take two RMDs in one tax year — the delayed first-year amount plus the current-year amount — which can spike your taxable income. Many retirees take the first RMD by December 31 anyway to avoid a double hit.
If you are still working at your RMD age, you may be able to delay RMDs from your current employer's 401(k) until you retire. This "still working" exception does not apply to IRAs or 401(k)s from former employers.
How is the RMD amount calculated?
The IRS publishes life expectancy tables. Most people use the Uniform Lifetime Table, which assumes you have a beneficiary roughly your age. The formula:
RMD = Prior December 31 account balance ÷ Life expectancy factor
Example: You turn 75 in 2026. Your traditional IRA was worth $500,000 on December 31, 2025. The IRS factor for age 75 is 24.6. Your 2026 RMD is roughly $500,000 ÷ 24.6 ≈ $20,325.
A few important details:
- Each account is calculated separately, but you can aggregate IRA RMDs and take the total from one or more IRAs. You cannot satisfy an IRA RMD from a 401(k), or vice versa.
- Multiple 401(k)s each require their own RMD from that specific plan (unless rolled into one).
- Market swings matter. A big year-end balance means a bigger RMD the following year, even if the market drops early in the year.
- Roth conversions before RMD age reduce future RMDs by shrinking the pre-tax balance.
Use a dedicated calculator to run your own numbers across multiple accounts and ages. We built RMD-calc.com for exactly this — enter your balance, birth year, and account type to see your required withdrawal and estimated tax impact.
What happens if you miss an RMD?
The penalty used to be 50% of the amount you failed to withdraw — one of the harshest penalties in the entire tax code. The SECURE 2.0 Act of 2022 reduced it to 25%, and to 10% if you correct the shortfall within two years.
Even at 10%, missing a $20,000 RMD costs you $2,000 in penalties on top of the taxes you already owe. The IRS expects Form 5329 with your return if you missed or under-withdrew. Financial institutions typically report distributions on Form 1099-R, so under-withdrawals can surface in audits.
Practical tip: Set up automatic annual distributions in January or schedule quarterly withdrawals so you never scramble in December.
RMDs and your tax bill
RMDs count as ordinary income. That has ripple effects:
- Federal and state income tax on the full withdrawal amount
- Medicare IRMAA surcharges if your modified adjusted gross income crosses thresholds ($106,000 for single filers, $212,000 for married filing jointly in 2026 — amounts adjust annually)
- Social Security taxation — up to 85% of benefits can become taxable depending on combined income
- Net Investment Income Tax (3.8% surtax) if your income exceeds $200,000 single / $250,000 married
For retirees watching every dollar against inflation, an unplanned RMD spike can quietly erode purchasing power even when your investment returns are solid.
Strategies to manage RMDs
You cannot eliminate RMDs from pre-tax accounts, but you can plan around them:
Roth conversions in lower-income years. Convert traditional IRA dollars to a Roth before RMDs begin. You pay tax now, but Roth accounts have no RMDs for the owner and withdrawals are tax-free. The sweet spot is often between retirement and when Social Security and RMDs stack up.
Qualified Charitable Distributions (QCDs). If you are 70½ or older, you can donate up to $108,000 per year (2026 limit, indexed for inflation) directly from an IRA to a qualified charity. The distribution counts toward your RMD but is excluded from taxable income. This is one of the most tax-efficient giving strategies available.
Spend down strategically before RMD age. Drawing from taxable brokerage accounts and Roth accounts first can keep your pre-tax balance lower when RMDs kick in.
Still-working exception. Delay 401(k) RMDs from your current employer's plan if you qualify.
Tax-loss harvesting in taxable accounts does not reduce RMDs, but it can offset capital gains from other sources in the same year.
RMDs and inflation
RMDs themselves are not indexed to inflation, but they interact with it in two ways worth noting.
First, if your portfolio grows faster than inflation, your year-end balance rises and so does your RMD — even if your real spending needs have not changed. Second, the income RMDs generate is nominal dollars taxed at today's brackets, while your living costs keep rising. A retiree who depended on a fixed withdrawal strategy before RMD age may find that mandatory distributions force more income than they need, with the excess sitting in taxable accounts earning modest returns after taxes.
That is why pairing RMD planning with tools like our inflation calculator and salary calculator helps — you can stress-test whether your withdrawal rate keeps pace with the cost of living.
The bottom line
RMDs are not optional, and the math is unforgiving if you ignore them. Know your starting age, calculate your annual amount early in the year, and think about tax impact before December 31 — not on December 30.
Calculate your RMD at RMD-calc.com →
Sources: IRS Publication 590-B (Distributions from IRAs); IRS Uniform Lifetime Table; SECURE Act (2019) and SECURE 2.0 Act (2022); Medicare IRMAA thresholds (CMS); IRS Form 5329 instructions. This article is for educational purposes and is not tax or financial advice. Consult a qualified professional for your situation.