RMDs by age: Understanding how distributions change as you get older

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.

A required minimum distribution is a rule that requires you to withdraw a minimum amount from tax-qualified retirement plans once you reach a certain age. Your RMDs are taxed at your current marginal tax rate. Because you contribute pretax dollars to these savings accounts, the IRS wants to make sure you pay your deferred taxes on them.

You can use your RMDs any way you like—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.

The Secure Act 2.0 aimed to increase the number of Americans saving for retirement and help them build assets. Among other changes to the tax code, it adjusted the RMD age to start at 73 and gradually increase to 75.

This change stemmed 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.

RMDs must begin by age:

• 72 if you were born in 1950 or earlier (70½ if you turned 70½ prior to 2020)
• 73 if you were born 1951-1959
• 75 if you were born 1960 or later

The SECURE Act 2.0 also reduced the penalty on non-withdrawals to 25% or 10% if you usually take it by the end of the second year it was due.

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 (including non-spouse beneficiaries of Roth IRAs)
• 401(k) plans
• 403(b) plans
• 457(b) plans
• Profit-sharing plans
• Other defined contribution plans

If you have a non-inherited Roth account, such as a Roth IRA or Roth 401(k), you don't need to comply with RMD rules.

• Roth IRAs were never subject to RMDs.
• The Secure Act 2.0 removed the RMD requirement from Roth 401(k)s, Roth 403(b)s and Roth 457(b)s.
  

The IRS has worksheets to help calculate your RMD. The formula starts with the balance of your retirement accounts at the end of the previous year. Then, use one of three tables provided by the IRS:

• Uniform Lifetime Table – for all unmarried IRA owners calculating their own withdrawals, married owners whose spouses aren’t more than 10 years younger, and married owners whose spouses aren’t the sole beneficiaries of their IRAs
• Single Life Expectancy - is used for beneficiaries who are not the spouse of the IRA owner
• Joint Life and Last Survivor Expectancy - is used for owners whose spouses are more than 10 years younger and are the IRA’s sole beneficiaries

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 in part 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.

If you inherited an IRA, you still need to satisfy the original account holder's RMD requirement if they needed to take the distribution before death but hadn't. For the year the owner passed, use the RMD the owner would have had to withdraw. After that, distribution under the SECURE Act rules may depend on their age at death.

When it comes to RMDs, you need to remember two important dates:

• Dec. 31. Your RMD calculations are based on the total amounts in your retirement savings accounts (not including your Roth IRA) as of Dec. 31 of the previous year.
• April 1. You must withdraw your first RMD by April 1 after the year you reach your RMD age. You only have to remember this date once. After that, you must withdraw your RMDs by Dec. 31 each year.

Say you turn 73 in 2025 and your qualified account balances on Dec. 31, 2024 are $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 April 1, 2026, to avoid IRS penalties. All subsequent RMDs must be taken out by December 31 of each year.

Using the same example, consider if you turned 80 in 2025 instead. You use the same table in this case, but your factor is 20.2. So, you divide $750,000 (your total qualifying retirement amount balances at the end of 2024) by 20.2. Here, your mandatory withdrawal is $37,129. The factor decreased because your age increased, which caused your RMD to increase.

If your spouse is 10 years younger than you or more, use the Joint Life and Last Survivor Expectancy table and find the factor at the intersection of your ages. Then, use that factor in the calculation instead. For example, if you turn 73 in 2025 and your spouse turned 60, your factor from this table is 28.6 (versus 26.5). That's slightly higher than the factor for people who are married to a spouse closer in age, so the RMD is slightly smaller at $26,224 because of the age gap.

One factor 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 your RMD age, you may have to pay taxes on two RMDs—the one you took in April and the one you have to take by Dec. 31. Consult with a financial advisor or tax professional to determine the best way to handle this situation.

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Don't need your RMDs for living expenses?

If you find that you don't need your RMD funds for day-to-day expenses in retirement, there are several ways to strategically use the money for other purposes. We cover six ways to consider using those funds.

See the list

Unfortunately, if you don't take your RMDs, the IRS will levy a penalty that amounts to 25% of the amount you were supposed to withdraw. That penalty is on top of the taxes you owe for your required withdrawal.

Sometimes, you may realize you made a mistake calculating your RMD or got confused about the dates and missed a deadline. If you correct the mistake within the correction window, the penalty shrinks to just 10%. The correction window begins on the date the tax is imposed and ends at the earliest of: when the Notice of Deficiency is mailed to the taxpayer, when the tax is assessed by the IRS, or the last day of the second tax year after the tax is imposed.

Another option is to get your RMDs automatically calculated and withdrawn. Many custodians can do that for you, or you can ask a financial advisor about your options for automating the process.

You have plenty of things to plan for as you enter retirement. Working with a local financial advisor can help you develop a strategy for your retirement planning needs, including navigating the rules and regulations around required minimum distributions.