Required minimum distributions (RMDs) eventually come into play for most retirement accounts. Here’s how the rules work today, when they apply, and how to plan for them in a tax‑smart way.
If you’ve built up a tax‑deferred retirement account, at some point the IRS requires you to start taking money out. RMDs are how the government ensures funds in traditional IRAs, 401(k)s, and similar accounts don’t remain tax‑deferred indefinitely.
Whether you’re nearing retirement, already there, or managing an inherited account, understanding when RMDs begin and how to plan for them can make a meaningful difference in long‑term outcomes.
Recent legislation, including the SECURE Act and SECURE 2.0 Act, has shifted the timeline and rules around RMDs. That makes now a good time to revisit what applies and how it fits into your broader plan.
When do RMDs start?
Your RMD start age depends on when you were born. For those born between 1951 and 1959, RMDs begin at age 73. If you were born in 1960 or later, they begin at age 75.
You have until April 1 of the year after reaching that age to take your first distribution. In many cases, though, it makes sense to take it in the year you reach your RMD age. Waiting can mean taking two distributions in the same year, which may increase your taxable income.
Most tax‑deferred retirement accounts are subject to RMDs, including traditional IRAs and employer-sponsored plans like 401(k)s, 403(b)s, and 457(b)s. Roth IRAs are not subject to RMDs during the original owner’s lifetime. And under SECURE 2.0, Roth accounts in employer plans are treated the same way and have no RMD requirements.
How is your RMD calculated?
Each year, your RMD is based on your account balance and your age. The IRS provides a life expectancy factor, and your required distribution is calculated by dividing your prior year-end balance by that number.
For example, a 75-year-old with a $500,000 IRA and a life expectancy factor of 24.6 would have an RMD of about $20,325.
If your spouse is your sole beneficiary and is more than 10 years younger than you, you may be able to use a different IRS table that results in a smaller annual distribution.
Most financial institutions that hold retirement account assets calculate your RMD and notify you of the amount. Still, it’s your responsibility to take the distribution on time. Working with a financial advisor can help ensure everything is coordinated correctly across accounts and aligned with your broader tax strategy.
What happens if you miss an RMD?
Missing an RMD can be costly. The IRS may assess a 25% penalty on the required amount that was not withdrawn. (This is reduced under SECURE 2.0 from the previous 50% penalty.) If you correct the mistake in the IRS’s allowed time frame, the penalty may be reduced to 10%.
The good news is that the IRS may waive penalties if you have a reasonable explanation. If you miss a distribution, the best next step is to take it as soon as possible and file IRS Form 5329 with a brief explanation.
Roth accounts and RMDs
Roth IRAs are never subject to RMDs during the original owner’s lifetime, allowing your money to continue compounding without a mandatory withdrawal schedule. As of 2024, that exemption extends to designated Roth accounts within 401(k), 403(b), and 457 plans as well.
As a result, Roth 401(k) assets can now remain in the plan without RMDs. In some cases, rolling them into a Roth IRA may still provide additional flexibility, such as broader investment options or simplified account management.
Roth conversions can also serve as a proactive strategy to reduce future RMD amounts. Converting traditional IRA funds before RMDs begin can shrink the taxable balance that is subject to future mandatory withdrawals. Taxes are due in the year of conversion, so timing and bracket management are essential parts of the analysis.
Inherited IRAs and RMDs
As more wealth passes from one generation to the next, inherited retirement accounts are becoming increasingly common. The rules can be complex, and following them correctly matters.
For most nonspouse beneficiaries inheriting an account from someone who passed away in 2020 or later, the SECURE Act introduced a 10-year rule. In general, the full account balance must be withdrawn by the end of the 10th year following the original owner’s death.
Final IRS regulations effective January 1, 2025, clarified an important detail. If the original account owner had already begun taking RMDs, many beneficiaries are also required to take annual distributions during years one through nine, not just withdraw the balance by year 10.
Spouses have more flexibility. They can treat the account as their own, roll it into their own IRA, or maintain it as an inherited IRA with its own distribution schedule.
Certain beneficiaries may qualify for more favorable treatment. Eligible designated beneficiaries such as minor children, individuals with disabilities, or those who are chronically ill, may still be able to take distributions over their life expectancy.
Smart strategies to manage RMDs
While understanding RMDs is important, planning for them is where your decisions can have the biggest impact. Here are three strategies to consider:
Strategy 1: qualified charitable distributions (QCDs)
If you’re charitably inclined and at least age 70 ½, a QCD allows you to transfer funds directly from your IRA to a qualified public charity (certain organizations, such as donor-advised funds and private foundations, are not eligible)— up to $111,000 per person in 2026, indexed for inflation.
That distribution counts toward your RMD but isn’t included in your taxable income. This can help reduce overall income, potentially lowering Medicare premium surcharges — Income-Related Monthly Adjustment Amount (IRMAA) —and the taxable portion of Social Security. For those who don’t itemize deductions, a QCD can be especially effective compared to taking a distribution and donating separately.
Strategy 2: Roth conversions before RMDs begin
Converting traditional IRA assets to a Roth IRA before your RMD start date can reduce the balance that is subject to future required distributions.
For many investors, this works best when done over several years to help manage tax brackets. While you’ll pay taxes on the amount converted, the tradeoff is the potential for tax-free growth and greater flexibility down the road, particularly if you expect higher future tax rates or want to reduce the tax burden passed to heirs.
Strategy 3: managing IRMAA exposure
For Medicare beneficiaries, larger RMDs can push income above IRMAA thresholds, resulting in higher Part B and Part D premiums.
In 2026, surcharges begin above $109,000 for single filers and $218,000 for married couples filing jointly. Monitoring your income each year — and coordinating RMDs with strategies like Roth conversions — may help reduce or avoid these additional costs.
One additional consideration: If you’re still working and contributing to your current employer’s 401(k), you may be able to delay RMDs from that plan until you retire. This exception doesn’t apply to IRAs or retirement plans from previous employers.
An RMD planning checklist
The bigger picture
RMD planning isn’t something you do once and set aside. As your account balances change, tax laws evolve, and your personal situation shifts, your approach may need to adjust over time.
Having a plan in place, and revisiting it regularly, can help you stay ahead of unnecessary taxes and make more informed decisions about your broader financial picture. Working with an advisor can help ensure your RMD strategy stays aligned with your goals and coordinated across tax, investment, and estate considerations.
If you are not a client and would like to learn more, contact Mercer Advisors to explore how RMD planning fits into your broader retirement income strategy.
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A required minimum distribution (RMD) is the minimum amount the IRS requires you to withdraw each year from most tax-deferred retirement accounts. These withdrawals ensure that money that hasn’t yet been taxed is eventually included in your taxable income.
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Your start age depends on your birth year. If you were born between 1951 and 1959, RMDs begin at age 73. If you were born in 1960 or later, they begin at age 75.
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Traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer-sponsored plans — including 401(k), 403(b), and 457(b) accounts — are subject to RMDs. Roth IRAs and, as of 2024, designated Roth accounts in workplace plans are not subject to RMDs during the original owner’s lifetime.
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No. RMDs are required and missing one can trigger a 25% excise tax on the required amount that was not withdrawn. If you don’t need the income, you may consider strategies such as a qualified charitable distribution (QCD) or reinvesting the funds in a taxable account.
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You’ll owe a 25% penalty on the required amount that was not withdrawn. If you correct the mistake in a timely manner, the penalty may be reduced to 10%. The IRS may also waive penalties for documented reasonable cause.
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For IRAs, yes, you can aggregate your RMDs and take the total from one or more IRAs. However, workplace plans like 401(k)s must each satisfy their own RMD. You cannot use an IRA distribution to cover a workplace RMD.
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No. Roth IRAs are not subject to RMDs during the original owner’s lifetime. Since 2024, Roth accounts in 401(k), 403(b), and 457 plans also follow this rule.
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For most nonspouse beneficiaries inheriting in 2020 or later, the account must be fully distributed within 10 years. If the original owner had already started RMDs, annual withdrawals are typically required in years one through nine. Spouses and certain eligible beneficiaries have more flexibility.
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A QCD is a direct transfer from your IRA to a qualified 501(c)(3) charity. If you’re age 70½ or older, you can direct up to $111,000 per person in 2026 to charity. The amount can count toward your RMD and is not included in your taxable income.
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RMDs increase your income, which can push you into higher Medicare premium brackets. In 2026, higher premiums apply if your income exceeds $109,000 (single) or $218,000 (married filing jointly). Because Medicare uses a two-year lookback, thoughtful planning can help manage potential IRMAA surcharges.
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