Individual retirement accounts (IRAs) are retirement savings accounts that offer certain tax-advantages. Some types of IRAs, including traditional and inherited Roth IRAs, are subject to required minimum distribution (RMD) rules.
What is an RMD on an IRA? In simple terms, it’s a withdrawal you make from an RMD every year once you reach a certain age. RMDs are a way for the IRS to ensure that retirement savers meet their tax obligations. Failing to take distributions when you’re supposed to could result in a tax penalty, so it’s important to know when you must take an RMD on an IRA.
Key Points
• Required minimum distributions (RMDs) are mandatory withdrawals from IRAs that account owners must start taking at age 73, as per IRS rules.
• RMDs apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, and other defined contribution plans.
• The RMD amount account holders need to withdraw is calculated using the IRS Uniform Lifetime or life expectancy tables.
• Failing to take RMDs can result in a 25% excise tax, reduced to 10% if corrected within two years.
• RMDs are taxed as ordinary income, and qualified charitable distributions (QCDs) can be used to reduce tax liability.
Required Minimum Distribution (RMD) Definition
A required minimum distribution is an amount you need to withdraw from an IRA account each year once you turn 73. (In 2023 the SECURE 2.0 Act increased the age that individuals had to start taking RMDs to age 73 for those who reach 72 in 2023 or later.) You can take out more than the minimum amount with an RMD, but you must withdraw at least the minimum to avoid an IRS tax penalty.
The minimum amount you need to withdraw when taking an RMD is based on specific IRS calculations (see more about that below).
Special Considerations for RMDs
RMD rules apply to multiple types of retirement accounts. You’re subject to RMDs if you have any of the following:
• Traditional IRA
• SEP IRA
• SIMPLE IRA
• 403(b) plan
• Profit-sharing plan
• Other defined contribution plans
• Inherited IRAs
You must calculate RMDs for each account separately.
Failing to take RMD distributions from IRAs or other eligible investment accounts on time can be costly. The SECURE 2.0 Act allows the IRS to assess a 25% excise tax on the amount you failed to withdraw. That penalty might drop to 10% if the RMD is properly corrected within two years.
Why Do You Have to Take an RMD?
The IRS imposes RMD rules on IRAs and other retirement accounts to prevent savers from deferring taxes on earnings indefinitely. Here’s how it works.
When you contribute to a traditional IRA, SEP IRA, SIMPLE IRA, 401(k), or a simple retirement plan, you fund your account with pre-tax dollars (meaning you haven’t yet paid tax on that money). In exchange, you may be able to deduct some or all of the contributions you make.
Your account grows tax-deferred, and when you make qualified withdrawals in retirement, you pay ordinary income tax on earnings. If you were to leave the money in your IRA untouched, the IRS couldn’t collect tax on earnings, hence the need for RMDs.
Roth IRAs generally don’t have RMDs. When you make contributions to a Roth account you use after-tax dollars — in other words, you’ve already paid taxes on that money. So you don’t have to pay taxes again when you make qualified withdrawals in retirement. However, if you inherit a Roth IRA, you will be required to take RMDs.
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RMDs for Roth and Traditional IRAs
When you open an IRA, you will typically choose between a Roth IRA or traditional IRA. There are differences between them when it comes to RMDs. Traditional IRAs are always subject to RMD rules. If you contribute to a traditional IRA, whether you max out the annual contribution limit or not, you can expect to take RMDs from your account later. RMD rules also apply when you inherit a traditional IRA.
Are there RMDs on Roth IRA accounts? No, if you’re making original contributions to a Roth IRA that you own. But you will need to take RMDs if you inherit a Roth IRA from someone else.
The IRS determines when you must take distributions from an inherited Roth IRA. The timing depends on whether the person you inherited a Roth IRA from was your spouse and whether they died before 2020 or in 2020 or later.
If you inherit an IRA from a spouse who passed away before 2020, you may:
• Keep the account as your own, taking RMDs based on your life expectancy, or follow the 5-year rule, meaning you generally fully withdraw the account balance by the end of the 5th year following the year of death of the account holder
OR
• Roll over the account to your own IRA
If you inherit an IRA from a spouse who passed away in 2020 or later, you may:
• Keep the account as your own, taking RMDs based on your life expectancy, delay beginning distributions until the spouse would have turned 72, or follow the 10-year rule, generally fully withdrawing the account balance by the end of the 10th year following the year of death of the account owner
OR
• Roll over the account to your own IRA
If you inherit an IRA from someone who is not your spouse and who passed away before 2020, you may:
• Take distributions based on your own life expectancy beginning the end of the year following the year of death
OR
• Follow the 5-year rule
If you inherited an IRA from someone who is not your spouse and who passed away in 2020 or later and you are a designated beneficiary, you may:
• Follow the 10-year rule
IRA withdrawal rules for inherited IRAs can be tricky so if you know that someone has named you as their IRA beneficiary, you may find it helpful to discuss potential tax implications with a financial advisor.
How To Calculate RMDs on an IRA
To calculate RMDs on an IRA, you divide the balance of your account on December 31 of the prior year by the appropriate life expectancy factor set by the IRS. The IRS publishes life expectancy tables for RMDs in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). You choose the life expectancy table that applies to your situation.
IRA Required Minimum Distribution Table Example
The IRS uses the Uniform Lifetime Table to determine RMDs for people who are:
• Unmarried account owners
• Married IRA owners whose spouses aren’t more than 10 years younger
• Married IRA owners whose spouses are not the sole beneficiaries of their account
Here’s how RMD distributions break down.
| Age | Distribution Period (Years) | Age | Distribution Period (Years) |
|---|---|---|---|
| 72 | 27.4 | 97 | 7.8 |
| 73 | 26.5 | 98 | 7.3 |
| 74 | 25.5 | 99 | 6.8 |
| 75 | 24.6 | 100 | 6.4 |
| 76 | 23.7 | 101 | 6.0 |
| 77 | 22.9 | 102 | 5.6 |
| 78 | 22.0 | 103 | 5.2 |
| 79 | 21.1 | 104 | 4.9 |
| 80 | 20.2 | 105 | 4.6 |
| 81 | 19.4 | 106 | 4.3 |
| 82 | 18.5 | 107 | 4.1 |
| 83 | 17.7 | 108 | 3.9 |
| 84 | 16.8 | 109 | 3.7 |
| 85 | 16.0 | 110 | 3.5 |
| 86 | 15.2 | 111 | 3.4 |
| 87 | 14.4 | 112 | 3.3 |
| 88 | 13.7 | 113 | 3.1 |
| 89 | 12.9 | 114 | 3.0 |
| 90 | 12.2 | 115 | 2.9 |
| 91 | 11.5 | 116 | 2.8 |
| 92 | 10.8 | 117 | 2.7 |
| 93 | 10.1 | 118 | 2.5 |
| 94 | 9.5 | 119 | 2.3 |
| 95 | 8.9 | 120 and over | 2.0 |
| 96 | 8.4 |
Source: IRS Uniform Lifetime Table
And here’s an example of how you might use this table to calculate RMDs on an IRA.
Assume that you’re 75 years old and have $1 million in your IRA as of last December 31. You find your distribution period on the chart, which is 24.6, then divide your IRA balance by that number.
$1 million/24.6 = $40,650 RMD
You’ll need to recalculate your RMDs each year, based on the new balance in your IRA and your life expectancy factor. You can use an online calculator to figure out RMD on an IRA annually.
Withdrawing Required Minimum Distribution From an IRA
There are two deadlines to know when making RMDs from an IRA: when distributions must begin and when you must complete distributions for the year. The SECURE 2.0 Act introduced some changes to the timing of RMD withdrawals from an IRA.
When Do RMDs Start?
Beginning in 2023, the minimum age at which you must begin taking RMDs rose to 73 (that’s the same age you must begin taking RMDs for 401(k)s, in case you are wondering). The deadline for the very first RMD you’re required to make when you turn 73, is April 1 of the following year. So, if you turned 73 in 2025, then your first RMD would be due no later than April 1, 2026.
Once you make your first RMD, all other RMDs after that are due by December 31 each year. So, using the example above, if you make your first RMD on April 1, 2026, then you’d need to make your second RMD by December 31 of that same year to avoid a tax penalty. Just keep in mind that taking two RMDs in one year could increase your tax burden for the year.
Qualified Charitable Distributions (QCDs)
Qualified charitable distributions (QCDs) are amounts you contribute to an eligible charity from your IRA. QCDs are tax-free and count toward your annual RMD amount, and you can contribute up to $100,000 per year. Using your IRA to make QCDs can lower the amount of tax you have to pay while supporting a worthy cause.
For a distribution to count as a QCD, it must be made directly from your IRA to an eligible charity. You can’t withdraw funds from your IRA to your bank account and then use the money to write a check to your favorite charity.
Note that QCDs are not tax-deductible on Schedule A, the way that other charitable donations are.
How RMDs Are Taxed
RMDs are taxed as ordinary income, assuming that all of the contributions you made were tax-deductible. If you have a traditional IRA, your RMDs would be taxed according to whichever bracket you fall into at the time the withdrawals are made.
With an inherited Roth IRA, withdrawals of original contributions are tax-free. Most withdrawals of earnings from an inherited Roth IRA are also tax-free unless the account is less than five years old at the time of the distribution.
The Takeaway
The IRS requires you to take RMDs on certain types of IRAs, including traditional IRAs and inherited Roth IRAs. Knowing at what age you’re required to take money from an IRA and your deadline for withdrawing it can help you plan ahead and avoid a potentially steep tax penalty.
In general, coming up with a financial plan for your future can help you work toward your retirement goals. You can consider different options for saving and investing, including IRAs, 401(k)s, or other types of savings or investment vehicles, to help determine the best fit for your money.
Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
FAQ
What happens if you don’t take RMDs from an IRA?
Failing to take an RMD from an IRA on time can result in a tax penalty. The current penalty is generally a 25% excise tax, assessed against the amount you were required to withdraw.
Do you have to take your IRA RMD if you are still working?
You do have to take RMDs from an IRA even if you’re still working. It’s worth noting that the IRS does typically allow you to defer RMDs from a 401(k) while you’re working — however, that rule doesn’t extend to IRAs.
Are you required to use IRA RMD money for specific purposes?
You can use RMDs money in any way that you like. Some common uses for IRA RMDs include medical expenses, home repairs, and day-to-day costs. You can also use IRA RMDs to make qualified charitable donations (QCD), which could minimize some of the tax you might owe. QCDs must be made directly from your IRA to the charity.
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