Which Accounts Are Subject to RMDs

• Traditional IRAs — all traditional IRAs require RMDs starting at age 73
• 401(k), 403(b), 457(b) plans — employer-sponsored plans require RMDs at 73 (or later if still working for that employer, for non-5% owners)
• SEP IRAs and SIMPLE IRAs — subject to the same RMD rules as traditional IRAs
• Inherited IRAs (non-spouse) — must be fully distributed within 10 years under the SECURE Act (with annual RMD requirements during those 10 years if the original owner had reached their RMD start date)
• Roth 401(k) accounts — previously subject to RMDs, but SECURE 2.0 eliminated RMDs for Roth 401(k)s starting in 2024

How RMDs Are Calculated

Your annual RMD is calculated using a simple formula:

RMD = Prior Year-End Account Balance ÷ IRS Life Expectancy Factor

The IRS life expectancy factor comes from the Uniform Lifetime Table (or Joint Life Expectancy Table if your sole beneficiary is a spouse more than 10 years younger). The factor decreases each year as you age — meaning a larger percentage of your account must be distributed annually.

If you have multiple traditional IRAs, you calculate the RMD for each account separately but can take the total from any combination of your IRAs. For 401(k)s, each plan's RMD must be taken from that specific plan.

RMD Timing — Deadlines and First-Year Rules

Strategies to Manage the Tax Impact of RMDs

• Roth conversions before RMDs begin. Converting traditional IRA funds to a Roth IRA in the years between retirement and age 73 reduces the traditional IRA balance — and therefore reduces future RMD amounts. This is the most powerful strategy for managing long-term RMD tax burden.
• Qualified Charitable Distributions (QCDs). If you're 70½ or older and charitably inclined, you can direct up to $105,000/year directly from your IRA to a qualified charity. This satisfies your RMD requirement but the distribution is excluded from your taxable income — a significant tax benefit.
• Reinvest RMDs you don't need. If you don't need the RMD funds for living expenses, reinvest them in a taxable brokerage account. Though you pay tax on the RMD, the reinvested amount continues to grow and can be invested for long-term capital gains treatment.
• Strategic asset location. Place lower-growth assets in the traditional IRA (to minimize RMD growth) and higher-growth assets in Roth or taxable accounts. This reduces the future RMD size while allowing growth to occur in more tax-efficient vehicles.
• Consider working longer if still employed. If you're still working for the employer sponsoring a 401(k) and are not a 5% or more owner, you may be able to delay RMDs from that specific 401(k) until you actually retire — regardless of age.

Common Mistakes

• Forgetting to take an RMD. The 25% excise tax penalty on missed RMDs is automatic and substantial. Set calendar reminders. Many custodians offer automatic RMD distribution services — consider enrolling if managing multiple accounts.
• Taking the wrong amount. The RMD calculation uses the prior year-end balance — not the current balance. Market fluctuations don't reduce your RMD obligation for the current year based on a lower current balance.
• Taking from the wrong account type. IRA RMDs can be aggregated and taken from any traditional IRA. 401(k) RMDs cannot be aggregated with IRA RMDs — each 401(k) RMD must come from that specific plan.
• Thinking a QCD counts toward next year's RMD. A QCD counts only toward the current year's RMD — not future years. Plan QCDs each year as part of your annual RMD management strategy.
• Not planning for RMDs in advance. Waiting until the first RMD arrives at age 73 to think about tax strategy is too late for the most impactful planning. The optimal window for Roth conversions and other RMD management strategies is typically years 60–72.

Real-Life Example