When you contribute to a traditional IRA or 401(k), you get a tax deduction upfront — but the IRS eventually wants its share. RMDs are how they collect. Starting at age 73 (raised from 72 under the SECURE 2.0 Act), you must withdraw a minimum amount each year based on your account balance as of December 31 of the prior year, divided by an IRS life expectancy factor.

The calculation sounds simple — but the impact can be significant. If you have $1 million in a traditional IRA at age 73, your first RMD is approximately $36,496 based on the IRS Uniform Lifetime Table. That withdrawal is added to your taxable income for the year, on top of Social Security, pension payments, and any other income — potentially pushing you into a higher tax bracket.

RMDs apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and most other employer-sponsored plans. They do NOT apply to Roth IRAs during the owner's lifetime — which is one of the most powerful reasons to do Roth conversions in your early retirement years before RMDs kick in.

As your account grows, your RMDs grow too. A retiree with $2 million in a traditional IRA at 80 could face RMDs of $100,000 or more per year — far more than they need to live on — creating a massive and largely unavoidable tax burden if not managed proactively.

The first RMD can be delayed until April 1 of the year following the year you turn 73 — but if you do that, you'll have to take two RMDs in one year, which doubles the tax impact. Most advisors recommend taking the first RMD in the year you turn 73 to avoid that problem.

• ✓RMDs begin at age 73 for traditional IRAs, 401(k)s, and most tax-deferred retirement accounts.
• ✓Missing an RMD triggers a 25% penalty on the amount you should have withdrawn — on top of regular income tax.
• ✓Roth IRAs are not subject to RMDs during the owner's lifetime — a major advantage of Roth accounts.
• ✓Roth conversions in early retirement can reduce future RMD amounts and long-term tax exposure significantly.
• ✓A qualified charitable distribution (QCD) allows you to satisfy your RMD tax-free by donating directly to charity.

Roth Conversions Before Age 73: Converting traditional IRA funds to a Roth IRA in the years between retirement and age 73 reduces the balance subject to RMDs. You pay taxes on the conversion now — ideally in a lower tax bracket — to avoid larger forced withdrawals later. This is one of the most powerful long-term tax strategies available to retirees.

Qualified Charitable Distributions (QCDs): If you're 70½ or older and charitably inclined, you can transfer up to $105,000/year directly from your IRA to a qualified charity. The distribution counts toward your RMD but is excluded from taxable income — a significant tax benefit for those who give regularly.

Still Working Exception: If you're still working at 73 and participating in your current employer's 401(k), you may be able to delay RMDs from that specific plan until you retire. This does not apply to IRAs or old 401(k)s from previous employers.

Aggregate RMDs for IRAs: If you have multiple traditional IRAs, you can calculate the total RMD across all of them and take the full amount from just one account — giving you flexibility to manage which accounts you draw from. This does not apply to 401(k)s, which require separate RMDs from each account.

Reinvest What You Don't Need: If you don't need the RMD for living expenses, you can reinvest it in a taxable brokerage account. It's not ideal from a tax perspective, but it keeps the money working for you rather than sitting in cash.

• ✗Missing your RMD deadline — the 25% penalty is steep and entirely avoidable with a simple calendar reminder or automatic withdrawal.
• ✗Delaying your first RMD to April 1 without realizing you'll owe two RMDs in one year — doubling your taxable income that year.
• ✗Waiting until 73 to think about RMDs — the window between retirement and 73 is your best opportunity to reduce them through Roth conversions.
• ✗Not accounting for RMDs in your tax projection — large RMDs can push you into a higher bracket, increase Social Security taxation, and trigger Medicare surcharges.
• ✗Assuming your financial institution will automatically calculate and remind you — while some do, the responsibility to take the correct RMD is ultimately yours.

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