Overview: What Is a Required Minimum Distribution (RMD)?
A required minimum distribution RMD is the minimum amount that retirement plan account owners must withdraw each year from certain retirement accounts once they reach a specific age. RMD rules apply to tax deferred retirement accounts-including traditional IRAs, SEP IRAs, simple IRA accounts, and employer sponsored retirement plans like 401 k, 403(b), and most 457(b) plans. Roth IRAs, by contrast, are not subject to RMDs during the account owner’s lifetime.
At Godsey & Gibb Wealth Management, we view understanding required minimum distribution requirements as a core part of retirement income, tax, and estate planning for retirees. This article covers when RMDs start, how they’re calculated, which accounts are subject, tax impact, strategies to reduce lifetime taxes, and special rules for inherited accounts. Note that RMD rules change periodically, so always coordinate with your tax advisor and fiduciary advisor for guidance specific to your situation.
When Do Required Minimum Distributions Start and How Often Are They Taken?
For most account holders, the first required minimum distribution must be taken the year they turn 73. The required beginning date for that first RMD is April 1 of the year after you reach RMD age. Every subsequent year, you must begin taking RMDs by December 31-no exceptions.
Here’s how the RMD age breaks down by birth year:
| Birth Year | RMD Age |
|---|---|
| Before 7/1/1949 | 70½ |
| 7/1/1949–12/31/1950 | 72 |
| 1951–1959 | 73 |
| 1960 or later | 75 (starting 2033) |
The “still working” exception allows employees of a plan sponsor who own 5% or less of the business sponsoring the retirement plan to delay RMDs from that workplace retirement plan until the year they retire. However, this exception never applies to traditional IRAs, SEP IRAs, simple IRA accounts, or defined contribution plans from former employers-those must start at the applicable RMD age regardless of employment status.
Failing to take an RMD incurs a 25% excise tax on the amount not withdrawn. The penalty drops to 10% if corrected within two years. RMDs must be taken by December 31 each year after age 73, and missing even a partial amount triggers this penalty.
How Are RMDs Calculated? Life Expectancy Factors and Multiple Accounts
The formula for calculating your annual RMD is straightforward: RMDs are calculated using the prior year-end account balance, which you then divide by an IRS life expectancy factor from the relevant table in Publication 590-B.
The IRS provides life expectancy tables for RMD calculations. Three tables cover different situations:
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Uniform Lifetime Table – used by most IRA owners and plan accounts holders
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Joint Life and Last Survivor Table – used when the sole beneficiary is a surviving spouse more than 10 years younger
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Single Life Expectancy Table – used primarily for non-spouse beneficiaries of accounts
Example: A 73-year-old IRA owner with a $1,000,000 account balance as of December 31 of the prior year would divide that balance by the uniform lifetime table factor of 26.5, yielding an RMD amount of approximately $37,735.
RMDs must be calculated separately for each retirement account type. However, the aggregation rules differ. For multiple IRAs (traditional, SEP, and SIMPLE), you calculate each RMD separately but can withdraw the total required minimum from just one account. You can withdraw your RMD from one IRA account if that’s simpler. For employer plans-separate 401 k or 457(b) accounts-RMDs must be taken separately from each plan. You cannot pull one plan’s RMD from another.
Which Retirement Accounts Are Subject to RMDs-and Which Are Not?
Subject to RMDs during the owner’s lifetime:
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Traditional IRAs, rollover IRAs, SEP IRAs, SIMPLE IRAs
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Employer plans: traditional 401 k, 403(b), governmental 457(b), profit sharing plans, and most qualified pensions
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Inherited IRAs and inherited employer plan accounts, including inherited Roth accounts
Not subject to RMDs during the owner’s lifetime:
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Roth IRAs
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Designated Roth accounts in employer plans (Roth 401(k), Roth 403(b)) – exempt beginning in 2024 under SECURE 2.0
Inherited IRAs are subject to RMD rules with different requirements depending on beneficiary type, which we cover below. Each account type may carry slightly different required minimum distribution requirements-for instance, special plan rules exist for pre-1987 403(b) contributions, certain annuity payments, and lifetime income payments from defined benefit plans.
RMDs cannot be satisfied from a non-retirement bank account or taxable brokerage account. Distributions must come from the specific tax deferred retirement accounts where the rules apply. And while you can aggregate multiple IRAs into a single withdrawal, each employer-sponsored retirement plan typically requires its own RMD separately.
Tax Impact of RMDs and Potential Tax Efficiency Strategies
Most required minimum distributions are taxed as ordinary income in the year withdrawn, adding directly to your adjusted gross income (“AGI”). This ordinary income tax treatment can push retirees into a higher tax bracket. Beyond bracket creep, higher AGI can trigger secondary consequences:
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Increased Medicare Part B and Part D premiums (IRMAA surcharges)
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Greater taxation of Social Security benefits
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Reduced eligibility for certain credits or deductions
Qualified Charitable Distributions can satisfy RMD requirements and are one of the most powerful tools available. QCDs allow individuals aged 70½ or older to directly transfer up to $111,000 from their IRA to a charity, satisfying their RMD without taxation. For charitably inclined retirees who no longer itemize deductions, a QCD eliminates the income tax liability on that portion of the distribution entirely. Learn more about how QCDs can reduce or satisfy your RMD.
At Godsey & Gibb, our in-house CPAs and CERTIFIED FINANCIAL PLANNER® professionals coordinate tax planning and preparation directly with your comprehensive financial plan in effort to ensure the impact of RMDs are anticipated and planned around in progress towards your goals.
Planning Strategies for RMDs and Rules for Inherited Accounts
For future retirement plan account owners in their late 50s and 60s, pre-RMD planning may meaningfully reduce lifetime taxes. Two key strategies:
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Partial Roth conversions in lower-tax years shrink future RMD amounts by moving assets from tax deferred accounts to Roth accounts, where they grow tax-free and are not subject to RMDs during the owner’s lifetime
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Coordinated withdrawal sequencing across taxable, tax deferred, and Roth accounts may help manage lifetime tax brackets and preserve multi-generational wealth
Inherited account rules changed dramatically under the Secure Act. Most non-spouse beneficiaries of an inherited IRA after December 31, 2019 must distribute the entire account balance within 10 years of the original owner’s death. If the original account owner had already begun taking RMDs before a participant dies, some beneficiaries may need annual distributions in years 1–9 plus full depletion by year 10. Eligible designated beneficiary categories-surviving spouse, certain disabled or chronically ill individuals, and minor children-may stretch distributions based on life expectancy. For a deeper look, see our guide on inherited IRAs and the 10-year rule.
A surviving spouse who is the sole beneficiary has unique flexibility: they can treat the inherited account as their own IRA, roll it into an existing account, or remain a designated beneficiary to potentially delay their own RMD deadline depending on ages.
Updated beneficiary designations and coordination with estate planning-wills, trusts, family wealth transfer strategies-are essential to avoid unintended tax acceleration for children and grandchildren. Godsey & Gibb Wealth Management brings together fiduciary, independent advisors and in-house CPAs to build integrated plans for RMDs, inherited IRAs, charitable giving, and family wealth transfer. If you’re approaching or in retirement, now is the time to review your RMD plan with a tax professional and fiduciary advisor who can see the full picture.
Expertise And Services To Help Navigate RMD Complexity
At Godsey & Gibb Wealth Management, our core expertise sits in investment management, financial planning, and tax planning/preparation for approaching and current retirees. RMD rules sit right at this center of this expertise.
If already are or soon will be required to take RMDs, we understand how overwhelming it can feel to execute properly and in the best interest of your financial success. If you would like to discuss how we can help, please reach out to us via “Meet With An Advisor” button below.