401k RMD Rules: Required Minimum Distributions

What Are Required Minimum Distributions?

Required minimum distributions, commonly called RMDs, are the minimum amounts you must withdraw from your tax-deferred retirement accounts each year once you reach a certain age. The IRS created this rule because tax-deferred accounts like Traditional 401k plans were always meant to be vehicles for retirement income, not permanent tax shelters. The government wants its tax revenue eventually.

RMDs apply to all pre-tax retirement accounts including Traditional 401k, Traditional IRA, SEP-IRA, SIMPLE IRA, and 403(b) plans. The amount you must withdraw is based on your account balance and your life expectancy. As you age, the percentage you must withdraw increases because your remaining life expectancy decreases.

Failing to take your RMD on time results in a significant excise tax penalty, although SECURE 2.0 reduced this penalty substantially from the old 50% rate. Understanding RMD rules well before you reach the required age is crucial for effective retirement tax planning.

When Do RMDs Start? The Age Rules

The starting age for RMDs has changed multiple times in recent years due to legislative action. Here is the current timeline under the SECURE 2.0 Act:

An important nuance: for your first RMD only, you can delay taking it until April 1 of the year after you turn 73. However, this means you would take two RMDs in the same year—your first one by April 1 and your second one by December 31. This could push you into a higher tax bracket, so most financial advisors recommend taking the first RMD in the year you turn 73 rather than delaying.

How to Calculate Your 401k RMD

Calculating your RMD involves a simple formula: divide your December 31 account balance from the prior year by the life expectancy factor from the IRS Uniform Lifetime Table that corresponds to your age on your birthday in the current year.

Sample RMD Calculations by Age

As you can see, the RMD percentage increases steadily with age. At 73, you withdraw roughly 3.8% of your balance. By 85, it is about 6.1%. By 90, it exceeds 8%. For retirees with large account balances, these mandatory withdrawals can create significant tax liability, especially when combined with Social Security income and other retirement income sources.

RMD Rules for Different Account Types

Not all retirement accounts are treated the same when it comes to RMDs. Understanding the distinctions helps you plan withdrawals strategically.

401k Plans

For 401k plans, you must calculate and take the RMD separately from each employer plan if you have multiple 401k accounts. Unlike IRAs, you cannot combine 401k RMD calculations across different plans. However, there is an important exception: if you are still working for the employer that sponsors the plan and you own less than 5% of the business, you can delay RMDs from that plan until you retire.

Roth 401k (New Rule)

In a major change under SECURE 2.0, Roth 401k accounts no longer require RMDs during the owner's lifetime, starting in 2024. Previously, Roth 401ks were subject to RMDs just like Traditional 401ks, which was a key disadvantage compared to Roth IRAs. This change eliminates the need to roll Roth 401k funds into a Roth IRA just to avoid distributions.

Traditional and Roth IRAs

For Traditional IRAs, you can calculate the total RMD across all your Traditional IRA accounts and take the entire amount from just one account. This gives you flexibility in choosing which investments to liquidate. Roth IRAs have never required RMDs during the owner's lifetime. For a full comparison of these account types, see our 401k vs IRA guide.

Penalties for Missing RMDs

The SECURE 2.0 Act significantly reduced the penalty for failing to take RMDs, but it is still substantial enough to warrant careful attention.

• Standard penalty: 25% of the amount you should have withdrawn but did not
• Corrected within 2 years: Penalty reduced to 10% of the shortfall
• Old penalty (before SECURE 2.0): Was 50% of the shortfall
• Income tax: You still owe ordinary income tax on the missed distribution regardless of the penalty

Tax Planning Strategies for RMDs

1. Roth Conversions Before RMD Age

One of the most powerful strategies is converting Traditional 401k or IRA money to Roth before RMDs begin. You pay taxes on the conversion amount, but once the money is in Roth, it grows tax-free and has no RMDs. This strategy works best during low-income years—early retirement before Social Security begins, for example.

2. Qualified Charitable Distributions (QCDs)

If you are charitably inclined, you can direct up to $105,000 per year (indexed for inflation) from your IRA directly to a qualified charity. This counts toward your RMD but is excluded from taxable income. QCDs are available starting at age 70½ and can be a powerful tax-reduction tool.

3. Bracket Management

Plan your RMDs to stay within your target tax bracket. If your RMD pushes you near a bracket threshold, consider adjusting other income sources. For instance, you might delay Social Security or take smaller withdrawals from taxable accounts to keep your total income in a lower bracket.

4. Still-Working Exception

If you continue working past 73 for the employer that sponsors your 401k and you own less than 5% of the company, you can delay RMDs from that specific plan. This exception does not apply to IRAs or 401k plans from former employers. This can be valuable for people who plan to work into their mid-70s. Learn more in our catch-up contributions guide.

5. Delay First RMD Strategically

While you can delay your first RMD until April 1 of the following year, think carefully before doing so. Taking two RMDs in one year could push you into a higher bracket. Run the numbers using a retirement calculator before deciding.

RMDs and Your Overall Retirement Income

RMDs do not exist in isolation. They interact with Social Security, pension income, investment income, and other retirement income sources. A $37,000 RMD from a $1 million 401k might not sound like much, but when added to $40,000 in Social Security benefits and $20,000 in investment income, it can push you well into the 22% or even 24% bracket.

The Medicare Income-Related Monthly Adjustment Amount (IRMAA) is another concern. Higher income from RMDs can increase your Medicare Part B and Part D premiums. A single person with modified adjusted gross income above $103,000 in 2026 pays higher Medicare premiums, and the surcharges increase at higher income levels.

This is why proactive planning in the years before RMDs begin—particularly between retirement and age 73—is so important. This "gap period" is often the best time for Roth conversions at lower tax rates. For help modeling these scenarios, see our Traditional vs Roth guide.

The RMD Timeline: Key Milestones

1. Age 59½: Penalty-free withdrawals become available (but not required)
2. Age 62: Earliest Social Security eligibility
3. Age 65: Medicare enrollment
4. Age 70½: Qualified Charitable Distributions become available
5. Age 73: RMDs begin for 401k and Traditional IRA accounts
6. Age 75: RMD age increases to 75 starting in 2033 (for those born 1960 or later)

Understanding this timeline helps you plan withdrawals strategically. The period between early retirement and RMD age is often called the "tax planning sweet spot" because you may be in a lower bracket with more flexibility. For more on early withdrawal considerations, see our 401k early withdrawal guide.