A required minimum distribution, usually shortened to RMD, is a minimum amount that IRA and retirement plan account owners generally must withdraw annually starting with the year they reach age 73 (IRS, Retirement plan and IRA required minimum distributions FAQs). It is a floor rather than a schedule: an owner may always withdraw more, and the amount is recomputed every year against a new balance and a new life expectancy factor.
The Required Beginning Date, as the Statute Writes It
The deadline is a defined term. The required beginning date means April 1 of the calendar year following the later of the calendar year in which the employee attains the applicable age, or the calendar year in which the employee retires (26 U.S.C. 401(a)(9)(C)(i)).
The second of those two, the retirement limb, is switched off in two situations, and both of them matter in practice. It does not apply, except as provided in section 409(d), in the case of an employee who is a 5-percent owner as defined in section 416 with respect to the plan year ending in the calendar year in which the employee attains the applicable age, and it does not apply for purposes of section 408(a)(6) or 408(b)(3) (26 U.S.C. 401(a)(9)(C)(ii)). Those last two sections are the individual retirement account described in section 408(a) and the individual retirement annuity described in section 408(b) (26 U.S.C. 4974(c)), which is why an IRA owner cannot defer the start by not retiring.
The IRS states the same rule from the other end. Participants in a workplace retirement plan, for example a 401(k) or profit-sharing plan, can delay taking their RMDs until the year they retire, unless they are a 5% owner of the business sponsoring the plan, while owners of traditional IRA, SEP and SIMPLE IRA accounts must begin taking RMDs once the account holder is age 73, even if they are retired (IRS, Retirement plan and IRA required minimum distributions FAQs).
The Applicable Age Is Written as Two Limbs, Not One Number
This is the part that has moved by statute and the part most often stated wrongly, so here it is as the Code writes it. In the case of an individual who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, the applicable age is 73. In the case of an individual who attains age 74 after December 31, 2032, the applicable age is 75 (26 U.S.C. 401(a)(9)(C)(v)).
The first limb is two conditions joined, not one. It requires attaining age 72 after December 31, 2022 and attaining age 73 before January 1, 2033. Reading only the first half of it turns a bounded cohort into an open one.
The IRS publication sets out the cohorts by the age each one reached, and each cohort carries its own date qualifiers:
- Age 73 for tax years 2023 and later. If you reach age 72 after December 31, 2022, you must begin receiving required minimum distributions by April 1 of the year following the year you reach the age 73.
- Age 72 for tax years 2020, 2021, or 2022. If you reached age 70½ after December 31, 2019, but had not reached age 72 before January 1, 2023, you had to begin receiving required minimum distributions by April 1 of the year following the year you reach age 72.
- Age 70½ for tax years 2019 or earlier. If you reached age 70½ before January 1, 2020, you were required to begin receiving required minimum distributions by April 1 of the year following the year you reach age 70½.
Those three are quoted from IRS, Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). The middle cohort is itself a two-sided window, reached 70½ after one date and not yet 72 before another, and dropping either side of it puts people in the wrong cohort.
The First Year Is the Only Year With Two Deadlines
You must take your first required minimum distribution for the year in which you reach age 73, and you can delay taking that first RMD until April 1 of the following year. The IRS works the case: if you reach age 73 in 2024, you must take your first RMD by April 1, 2025, and the second RMD by Dec. 31, 2025 (IRS, Retirement plan and IRA required minimum distributions FAQs).
That is one calendar year holding two distributions, and both of them are taxable in it. The deferral is a timing choice with a cost attached, not a free extension.
Which Accounts Are In and Which Are Out
The RMD rules apply to all employer sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans, and they also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs (IRS, Retirement plan and IRA required minimum distributions FAQs). Which arrangements count as qualified in the first place is set out in qualified retirement plans.
The Roth exclusion has a limb people drop. The RMD rules do not apply to Roth IRAs or Designated Roth accounts while the owner is alive, and they do apply to the beneficiaries of Roth IRA and Designated Roth accounts (IRS, Retirement plan and IRA required minimum distributions FAQs). A Roth is exempt for one lifetime, not permanently.
How the Amount Is Figured, and Which Accounts Can Be Combined
Generally, an RMD is calculated for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor that the IRS publishes in tables in Publication 590-B (IRS, Retirement plan and IRA required minimum distributions FAQs). Three tables exist and the choice between them is situational: the joint and last survivor table where the sole beneficiary is a spouse more than 10 years younger, the uniform lifetime table where the spouse is not the sole beneficiary or is not more than 10 years younger, and the single life expectancy table for a beneficiary of an inherited account.
Aggregation is where the arithmetic and the withdrawal come apart, and the answer differs by account type. An IRA owner must calculate the RMD separately for each IRA they own but can withdraw the total amount from one or more of the IRAs, and a 403(b) contract owner may do the same across their 403(b) contracts. However, RMDs required from other types of retirement plans, such as 401(k) and 457(b) plans, must be taken separately from each of those plan accounts (IRS, Retirement plan and IRA required minimum distributions FAQs).
Two administrative points sit beside that. Although the IRA custodian or retirement plan administrator may calculate the RMD, the account owner is ultimately responsible for taking the correct amount, and a distribution in excess of one year’s RMD cannot be applied to the RMD for a future year (IRS, Retirement plan and IRA required minimum distributions FAQs).
The Excise Tax for Missing One
If the amount distributed during the taxable year of the payee under any qualified retirement plan or any eligible deferred compensation plan as defined in section 457(b) is less than the minimum required distribution for that year, a tax equal to 25 percent of the amount by which the minimum required distribution exceeds the actual amount distributed is imposed, and the tax is paid by the payee (26 U.S.C. 4974(a)). That rate is not the historical one: Pub. L. 117-328 substituted 25 percent for 50 percent, and added the reduction described next (26 U.S.C. 4974, amendment notes).
The reduction to 10 percent has two conditions and both have to be met. The taxpayer must receive a distribution, during the correction window, of the amount which resulted in imposition of the tax, from the same plan to which the tax relates, and must submit a return, during the correction window, reflecting that tax. Where both hold, the first sentence of subsection (a) is applied by substituting 10 percent for 25 percent (26 U.S.C. 4974(e)(1)). Taking the missed distribution and filing nothing does not reach the lower rate.
The correction window is not simply two years either. It begins on the date the tax is imposed with respect to the shortfall and ends on the earliest of three dates: the date of mailing a notice of deficiency with respect to the tax under section 6212, the date on which the tax is assessed, or the last day of the second taxable year that begins after the end of the taxable year in which the tax is imposed (26 U.S.C. 4974(e)(2)). The IRS shorthand for that window is “10% if the RMD is timely corrected within two years” (IRS, Retirement plan and IRA required minimum distributions FAQs), which is the third date only. An assessment or a notice of deficiency closes the window sooner.
A full waiver is a separate provision with two conditions of its own. If the taxpayer establishes to the satisfaction of the Secretary that the shortfall was due to reasonable error, and that reasonable steps are being taken to remedy the shortfall, the Secretary may waive the tax for the taxable year (26 U.S.C. 4974(d)). The word is “may”. The route for both the tax and the waiver request is Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, filed with the return for the year in which the full amount of the RMD was required but not taken, with a letter of explanation attached where relief is sought (IRS, Retirement plan and IRA required minimum distributions FAQs).
After the Owner Dies
For defined contribution plan participants or IRA owners who die after December 31, 2019, with a delayed effective date for certain collectively bargained plans, the entire balance of the deceased participant’s account must be distributed within ten years, and that rule applies regardless of whether the participant dies before, on, or after the required beginning date (IRS, Retirement plan and IRA required minimum distributions FAQs).
There is an exception, and it is a list rather than a single case: a surviving spouse, a child who has not reached the age of majority, a disabled or chronically ill person, or a person not more than ten years younger than the employee or IRA account owner (IRS, Retirement plan and IRA required minimum distributions FAQs). The Code carries that list as the defined term eligible designated beneficiary, and it splits one of the IRS’s four items into two, running disabled and chronically ill as separate subclauses (26 U.S.C. 401(a)(9)(E)(ii)). Counting the categories from the summary and from the statute therefore gives different answers to the same question.
Common Questions
At the owner’s own income tax rate, and not all of the withdrawal is necessarily reached. Withdrawals are included in taxable income except for any part that was already taxed, the owner’s basis, or that can be received tax-free, such as qualified distributions from designated Roth accounts (IRS, Retirement plan and IRA required minimum distributions FAQs). There is no separate RMD rate.
Yes (IRS, Retirement plan and IRA required minimum distributions FAQs). The constraint runs one way only. What the extra withdrawal does not do is create credit against a later year’s requirement.
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