For many retirement accounts, the Internal Revenue Service (IRS) requires you to withdraw a certain amount of funds from your savings each year. This is what's known as your required minimum distribution (RMD).
Not every type of retirement account mandates that account holders take RMDs annually. However, those that do require it have rules that change with age—and penalties if those guidelines aren't followed.
Here's what you need to know about the requirements for RMDs by age, including how to calculate your RMDs and avoid penalties.
What is a required minimum distribution?
The IRS mandates RMDs from most, but not all, retirement accounts. If you have any of the following retirement savings accounts, you're subject to RMD regulations:
- Traditional individual retirement accounts (IRAs)
- Simplified Employee Pension (SEP) IRAs
- Savings Incentive Match Plan for Employees (SIMPLE) IRAs
- Beneficiary IRAs (non-spouse beneficiaries of Roth IRAs)
- 401(k) plans including Roth 401(k)
- 403(b) plans
- 457(b) plans
- Profit-sharing plans
- Other defined contribution plans
If you have a
You can use your distributions any way you like—to use as income, to donate to charity or to cover other expenses. You can't reinvest your RMD funds into a 401(k) or IRA, but you can put the money into savings or a (taxable) brokerage account.
Your RMDs are taxed at your current income level. Because you contribute pretax dollars to these savings accounts, the IRS wants to make sure you pay your deferred taxes on them. Consider exploring how you can
Do RMDs increase with age?
Whether or not RMDs increase by age is dependent on several factors, they can increase but are ultimately based on account balances, life expectancy and age. Once you begin withdrawing your RMDs, you'll find that the exact amount changes yearly. That's due to the life expectancy portion of the calculation, which is called your life expectancy factor or distribution period. As you age, your factor decreases, and your RMDs may grow as you get older.
To calculate your personal RMD, you must use the Uniform Lifetime Table. But note that there a few exceptions below.
Uniform Lifetime Table. This table is used for everyone. The only exception for any account holder who has a spouse more than 10 years younger than them. In this case, the Joint Life table is used. The table is based on actuarial calculations. These tables are in effect as of January 1, 2022. Therefore, previous tables won't be accurate for running calculations. See the most recent chart below.
|Age||Distribution Period (in years)||Age (Cont.)||Distribution Period Cont. (in years)|
|95||8.9||120 and over||2|
|96||8.4|| || |
Exceptions for the Uniform Lifetime Table
- Table I (Single Life Expectancy). If you are the beneficiary of an IRA and aren't the spouse of the IRA owner, see the
Single Life Expectancy Table.
- Table II (Joint Life and Last Survivor Expectancy). If you have a spouse 10 years younger than you and are the IRA's sole beneficiary, see the
Joint Life and Last Survivor Table.
How are RMDs calculated?
Your RMD is the result of a relatively straightforward formula. First, take your prior year's qualifying IRA and retirement plan balances, and add them up. Then, divide that number by your life expectancy factor from your required table the IRS provides found above. The number is your RMD for that year. You will need to group like account types (IRAs, 403[b]s together) 401(k) is calculated separate from that group and take distributions from each independently to satisfy the requirement properly.
Here are a few examples of how RMDs might change with age*:
- Say you turned 73 in 2022 and your total qualified retirement account balances on December 31, 2021 were $750,000. You're married with a spouse only a year younger, so you use the standard Uniform Lifetime Table. Your factor is 26.5. To find your RMD, divide $750,000 by 26.5 to get $28,302. That's the amount you must withdraw by December 31, 2022 to avoid penalties from the IRS.
- Your marital status and retirement account balances are the same as above, except now, you turned 80 in 2022. You'll use the same table in this case, but your factor is 20.2. So, you'll divide $750,000 (your total qualifying retirement amount balances at the end of 2021) by 20.2. Here, your mandatory withdrawal is $37,129.
- The factor decreased because your age increased, which caused your RMD to increase.
- If you have a spouse younger than you by 10 years or more, then you'll use Table II and find the factor at the intersection of your ages. Then, use that factor in the calculation instead. For example, if you turned 73 in 2022 and your spouse turned 60, your factor from Table II is 28.6 (vs. 26.5). That's slightly higher than the factor for people who are married to a spouse closer in age, so the RMD would be slightly smaller at $26,224 because of the age gap.
Important dates to remember for RMDs
There are a few important dates to remember before running the numbers:
- RMDs begin the year you attain age 72. However, if you turned 70½ before Jan. 1, 2020, then you must follow the previous rule.
- December 31. Your RMD calculations are based on the total amounts in your retirement savings accounts (not including your Roth IRA) as of December 31 the previous year.
- April 1. You must withdraw your first RMD by April 1 after the year you turn 72. You'll only have to remember this date once. After that, you must withdraw your RMDs by December 31 each year.
For example*: If you turn 72 in October 2022, you have until April 1, 2023 to withdraw your first RMD (based on the total balance of your December 31, 2021 retirement account values). After that, you must take any subsequent RMDs by December 31 of that year. For 2023, you must withdraw your RMDs by December 31, 2023 based on your 2022 account values.
One last thing to consider, especially during the first year you're required to take RMDs, is how the timing of your withdrawals can impact your taxes. If you wait until April 1 the year after you turn 72, you may have to pay taxes on two RMDs—the one you took in April and the one you have to take by December 31. Consult with a financial advisor or tax professional to determine the best way to handle this situation.
What happens if I don't take my RMDs?
Unfortunately, if you don't take your RMDs, the IRS will levy a penalty that amounts to 50% of the amount you were supposed to withdraw. That penalty is on top of the taxes you owe for your required withdrawal.
For example*, if your RMD is $20,000 and you only take $10,000, the IRS will tax you for the total required amount of $20,000. You'll also face a 50% tax on the $10,000 you didn't take, meaning you will owe the IRS an additional $5,000.
Sometimes, you may realize you made a mistake calculating your RMD or got confused about the dates and missed a deadline. If that's the case, you can ask the IRS to waive the penalties. To ask for a penalty waiver on your RMDs, fill out
Another option is to get your RMDs automatically calculated and withdrawn. Many custodians can do that for you, or you can ask a financial professional about your options for automating the process.
How the SECURE Act changed RMD rules
This change stems in part from the fact that people are living longer and spending more time enjoying retirement. Gaining a few years of savings can help extend retirement incomes for many.
As of 2022, the
The bottom line
You have plenty of things to plan for as you enter retirement. Working with a