What Are RMDs?
When you contribute to a Traditional IRA or 401(k), you defer taxes on those contributions and their growth. The IRS eventually requires you to take withdrawals and pay tax — that’s what RMDs are. They prevent wealthy individuals from using tax-deferred accounts as perpetual tax shelters.
RMDs apply to: Traditional IRAs, SEP-IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, and most other defined contribution plans. Roth IRAs owned by the original account holder are not subject to RMDs during the owner’s lifetime — a key Roth advantage.
RMD Starting Age
Under SECURE 2.0 (passed in 2022): if you turn 73 in 2026, your RMD starting age is 73. For those born in 1960 or later, it increases to 75. Your first RMD can be delayed until April 1 of the year after you reach your RMD age — but doing so means taking two distributions in that second year (the delayed first-year RMD plus the second year’s RMD), potentially creating a large taxable income spike.
How RMDs Are Calculated
RMD = Account Balance on December 31 of prior year ÷ IRS Life Expectancy Factor
The life expectancy factor comes from the IRS Uniform Lifetime Table. At age 73, the factor is 26.5; at 80, it’s 20.2; at 85, it’s 16.0. As you age, the factor decreases and the RMD percentage of your balance rises.
| Age | IRS Factor | $500k Balance → RMD | $1M Balance → RMD |
|---|---|---|---|
| 73 | 26.5 | $18,868 | $37,736 |
| 76 | 23.7 | $21,097 | $42,194 |
| 80 | 20.2 | $24,752 | $49,505 |
| 85 | 16.0 | $31,250 | $62,500 |
Source: IRS Publication 590-B. Factors from the Uniform Lifetime Table.
Strategies to Minimise RMD Tax Impact
Roth conversions before RMD age: Converting pre-tax IRA funds to Roth in the years between retirement (or 60) and age 73 reduces the pre-tax balance that drives future RMDs. Pay taxes now at potentially lower rates to reduce mandatory distributions later.
Qualified Charitable Distributions (QCDs): If you’re 70½ or older, you can transfer up to $105,000 directly from your IRA to a qualified charity. The QCD counts toward your RMD but is excluded from taxable income — effectively donating pre-tax retirement money to charity without the tax hit. A powerful strategy for charitable retirees.
Continue working: If you’re still employed at your RMD age, you can delay RMDs from your current employer’s 401(k) (not IRAs) until you retire.