Understanding Required Minimum Distributions (RMDs) After 73

If you’ve spent decades faithfully saving in a traditional IRA or 401(k), the government eventually wants its share of the tax it deferred for all those years. Enter Required Minimum Distributions — RMDs — the mandatory annual withdrawals that the IRS requires you to take from most retirement accounts once you reach a certain age.

Thanks to the SECURE 2.0 Act, the rules changed in recent years. If you haven’t caught up on the updates — or if RMDs are still a mystery to you — this guide covers everything you need to know.

What Are Required Minimum Distributions?

An RMD is the minimum amount you must withdraw from your tax-deferred retirement accounts each year. The IRS requires these withdrawals because your contributions (and their growth) have never been taxed — and the government isn’t going to wait forever.

RMDs apply to:

• Traditional IRAs
• SEP IRAs and SIMPLE IRAs
• 401(k), 403(b), and 457(b) plans
• Most other employer-sponsored retirement plans

Roth IRAs are a notable exception — they are not subject to RMDs during the original owner’s lifetime. This is one of the reasons Roth accounts are so valuable for long-term planning and legacy purposes.

The New Age Rule Under SECURE 2.0

Before 2020, RMDs began at age 70½. The original SECURE Act pushed that to 72. Then SECURE 2.0, passed in late 2022, raised the age again — to 73 starting in 2023. And it’s scheduled to increase to 75 for people born in 1960 or later.

Here’s a quick summary:

• Born before 1951: RMDs already in progress, began at 70½
• Born 1951–1959: RMDs begin at age 73
• Born 1960 or later: RMDs will begin at age 75

Your first RMD must be taken by April 1 of the year following the year you turn 73. Every subsequent year, you must take it by December 31. Important note: if you delay your first RMD to April 1, you’ll have to take two distributions in that year (your first and your second), which could push you into a higher tax bracket.

How to Calculate Your RMD

Your RMD is calculated by dividing your account balance (as of December 31 of the prior year) by a life expectancy factor from IRS tables. The IRS publishes updated Uniform Lifetime Tables in Publication 590-B, which are available at irs.gov.

For example, if you’re 75 years old and have $400,000 in a traditional IRA, the IRS life expectancy factor for age 75 is approximately 24.6. Your RMD would be roughly $400,000 ÷ 24.6 = approximately $16,260 for the year.

If you have multiple traditional IRAs, you calculate an RMD separately for each account, but you can withdraw the total from any combination of those accounts. For 401(k) plans, you must generally take each plan’s RMD separately.

Many financial institutions calculate your RMD for you automatically — but it’s worth understanding the formula so you can verify the number yourself.

What Happens If You Miss an RMD?

Missing an RMD used to carry one of the steepest penalties in the tax code — a 50% excise tax on the amount you should have withdrawn. SECURE 2.0 reduced that penalty significantly, to 25% — and if you correct the error quickly (within two years), the penalty drops to 10%.

That’s still a painful miss. If you forget or underpay your RMD, take the missed amount as soon as possible and file IRS Form 5329 with a request for a penalty waiver. The IRS has been fairly lenient with first-time offenders who correct the mistake promptly.

Set a calendar reminder each year for October or November to review your RMD status. Your financial institution may also offer automatic RMD services to ensure you’re never caught short.

Strategies to Manage the Tax Impact

RMDs are taxed as ordinary income, and for many retirees, they can push income into a higher bracket, increase the taxation of Social Security benefits, or trigger IRMAA Medicare premium surcharges. Here are some strategies to soften the blow:

• Qualified Charitable Distributions (QCDs): If you’re 70½ or older, you can donate up to $105,000 per year directly from your IRA to a qualified charity. That amount counts toward your RMD but is excluded from your taxable income — one of the best tax deals in the retirement code.
• Roth conversions before 73: Converting portions of your traditional IRA to Roth in the years before RMDs begin shrinks the taxable balance that generates future RMDs.
• Reinvesting RMDs: If you don’t need the RMD for living expenses, you can reinvest it in a taxable brokerage account or a Roth (if you still qualify to contribute). The money continues to grow, just in a different account.
• Bunching charitable gifts: Use QCDs to support causes you care about while simultaneously reducing your taxable income each year.

Key Takeaways

• RMDs are mandatory annual withdrawals from traditional IRAs, 401(k)s, and similar accounts — Roth IRAs are exempt during the owner’s lifetime.
• Under SECURE 2.0, RMDs now begin at age 73 (or 75 for those born in 1960 or later).
• Your RMD is calculated by dividing your prior year-end balance by an IRS life expectancy factor.
• Missing an RMD triggers a 25% penalty (reduced to 10% if corrected quickly) — set reminders and use automated services where available.
• Qualified Charitable Distributions and Roth conversions are powerful tools to manage the tax burden of RMDs.

Recommended Reading: 10 Costly Medicare Mistakes You Can’t Afford to Make — a highly rated guide to help you make the most of your retirement.