Definition
A required minimum distribution (RMD) is an annual minimum withdrawal from specified retirement accounts. This guide covers account owners; inherited accounts have separate rules that depend on the beneficiary and when the original owner died.
Traditional IRAs, including SEP and SIMPLE IRAs, and many employer retirement plans have RMD requirements. Roth IRAs have no lifetime owner RMDs. Designated Roth plan accounts, such as Roth 401(k) accounts, also have no lifetime owner RMDs for 2024 and later years. Beneficiaries can still face distribution requirements.
When RMDs Start
Starting ages depend on birth date, not simply whether you were born before 1960:
| Birth date | Applicable starting age |
|---|---|
| Before July 1, 1949 | 70½ under the earlier rules |
| July 1, 1949 through December 31, 1950 | 72 |
| 1951 through 1958 | 73 |
| 1959 | Proposed IRS regulations specify 73; confirm final guidance before it applies |
| 1960 or later | 75 |
The IRS's 2024 regulations and accompanying proposal explain the special drafting issue for 1959 births. The proposal should not be described as a finalized rule. Older owners do not restart RMDs under the newer age thresholds.
Some current-employer plans permit a delay until retirement for employees who are not 5% owners. That exception does not apply to traditional IRAs. Check your plan's terms.
Why It Matters
Your first owner RMD can generally be delayed until April 1 of the following year. Later RMDs are generally due December 31 each year. Delaying the first one can place two distributions in the same calendar year, affecting taxable income.
Use the IRS RMD overview to check the applicable deadlines and exceptions. Plan withdrawal processing takes time; do not confuse submitting an instruction with completing a distribution.
Example
The usual owner calculation is:
RMD = prior December 31 account balance / applicable IRS distribution factor
For a hypothetical 75-year-old using the Uniform Lifetime Table, a $246,000 prior-year-end balance divided by 24.6 produces a $10,000 RMD. The calculation uses the applicable balance and table, not the account's dividend yield or the amount the owner wants to spend.
A different table applies when the sole beneficiary is a spouse more than ten years younger. The tables and IRA details are in IRS Publication 590-B.
Common Mistakes
- Counting dividends that remain inside the retirement account as withdrawals.
- Using this year's balance instead of the applicable prior-year-end balance.
- Assuming one withdrawal satisfies unrelated employer plans and IRAs.
- Treating an excess withdrawal as a credit against next year's RMD.
- Rolling over or converting an RMD amount to a Roth IRA; RMDs are not eligible for rollover.
FAQ
Can I take the entire RMD from one account?
An owner generally calculates each traditional IRA's RMD separately and can withdraw the combined IRA amount from one or more of those IRAs. Employer plans generally require separate satisfaction, with an aggregation rule for 403(b) accounts. Inherited accounts need separate analysis. See the IRS RMD FAQs.
What happens if I miss an RMD?
The shortfall can trigger a 25% excise tax, reduced to 10% when the correction requirements are met. Reasonable-error waiver relief may be available through Form 5329. Correct the shortfall and check the reporting rules rather than assuming a late withdrawal erases it. IRS Publication 575 explains the correction window.
Do dividend investments avoid RMD taxes or sequence risk?
No. Cash distributions can help fund a withdrawal, but they do not change the account's tax rules or eliminate market losses. Plan the withdrawal around the RMD requirement, available liquidity, and the portfolio's overall risks.
