Retirement accounts are often called a nest egg for good reason. They are meant to support you after you stop working, but the IRS does not let them sit indefinitely. Required Minimum Distributions, or RMDs, are mandatory withdrawals from many tax-deferred retirement accounts once you reach a certain age. Miss a deadline, and the penalty can be severe. Understand the rules, however, and an RMD can become part of a thoughtful income and tax strategy instead of a year-end scramble. Bartley Insurance Services helps clients connect RMD rules with the bigger picture of retirement income, insurance, and legacy planning.
An RMD is the minimum amount you must withdraw from certain retirement accounts each year after you reach the IRS-defined applicable age. It is not a suggestion or a one-time event; it is an annual requirement that continues for the life of the account owner. The amount is generally taxed as ordinary income in the year you take it. You can always withdraw more than the minimum, but you cannot satisfy the rule by withdrawing less.
RMDs apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer-sponsored plans such as 401(k), 403(b), and governmental 457(b) plans. Roth IRAs do not require lifetime RMDs for the original owner. Beginning in 2024, Roth 401(k) accounts also no longer require pre-death RMDs, thanks to SECURE 2.0. Inherited accounts have their own rules and should be reviewed separately.
A key point that surprises many retirees is that an RMD cannot be rolled over or converted to a Roth IRA. Once the distribution is made, it must leave the tax-deferred account. If you want to do a Roth conversion, you generally need to take the RMD first and then convert additional funds. This sequencing matters for anyone trying to manage taxable income in retirement.
The age at which RMDs begin depends on your birth year. Under SECURE 2.0, the applicable age is generally 73 for people born from 1951 through 1959, and 75 for people born in 1960 or later. If you reached age 72 before 2023, you likely fell under the older rules and may already have started taking RMDs. Because the rules have changed more than once, it is worth confirming your specific start date rather than relying on a general rule of thumb.
Your first RMD is due by April 1 of the year after you reach your applicable age. After that, each RMD is due by December 31 of the year for which it applies. That April 1 deadline is a one-time option, not a permanent extension. Many retirees take their first RMD in the year they reach the applicable age simply to avoid stacking two distributions into the following year.
There is a limited exception for some employer plans. If you are still working and are not a 5% owner of the business, your current 401(k) plan may allow you to delay RMDs until you retire. This exception does not apply to traditional IRAs, and it does not apply to older plans from former employers. Always check the plan document and confirm your ownership status.
The first-year deadline is one of the most common sources of confusion. Suppose you turn 73 in 2026. You could delay your first RMD until April 1, 2027. However, you would still need to take your 2027 RMD by December 31, 2027. That means two taxable RMDs in the same calendar year, which can push you into a higher tax bracket, increase Medicare premium surcharges, or affect other income-based benefits.
For many people, taking the first RMD in the year it becomes due is the cleaner choice. It spreads taxable income more evenly and avoids a second-year pileup. If you are considering the delay, model the tax impact first. A short conversation with a tax professional or retirement planner can prevent a costly surprise.
The basic formula is straightforward: divide your account balance as of December 31 of the prior year by a life expectancy factor from the IRS Uniform Lifetime Table. The resulting number is the minimum you must withdraw for the current year. The factor changes as you age, so the required percentage generally increases over time. Investment gains and losses can also change the dollar amount from year to year.
For example, assume your traditional IRA balance was $500,000 on December 31 of the prior year and you are turning 73. The Uniform Lifetime Table factor for age 73 is 26.5. Dividing $500,000 by 26.5 gives an RMD of about $18,868. At age 75, the factor is 24.6, so the same $500,000 balance would produce an RMD of about $20,325. These examples are illustrative; your actual balance and factor will determine your requirement.
There is a special exception when your spouse is the sole beneficiary and is more than 10 years younger than you. In that case, you may be able to use the Joint and Last Survivor Table, which can produce a smaller RMD. This is one reason beneficiary designations matter. An outdated form can override your will and change the tax outcome for your family.
Traditional IRA RMDs can generally be aggregated. You can calculate the total RMD across all your traditional IRAs and take the full amount from one or more of them. This gives you flexibility to withdraw from the account that makes the most sense. However, you cannot satisfy an IRA RMD by taking money from a 401(k) or other employer plan.
Employer plans usually require separate calculations and separate withdrawals for each plan. If you have multiple 401(k) accounts from different employers, do not assume one withdrawal covers all of them. The same caution applies to 403(b) accounts and other plan types, which may have their own aggregation rules. When in doubt, calculate each account separately or get professional guidance before the deadline.
Missing an RMD can trigger an excise tax equal to 25% of the amount that should have been withdrawn. The penalty can be reduced to 10% if the mistake is corrected within the correction window and the proper form is filed. That is still a significant cost for a paperwork or timing error. The IRS may waive the penalty in some cases, but you should not rely on a waiver.
Other common mistakes include:
Inherited accounts deserve special attention. The SECURE Act changed the rules for many non-spouse beneficiaries, generally requiring the account to be emptied within 10 years. If the original owner died on or after their required beginning date, annual RMDs may also be required during that 10-year period for certain beneficiaries. Eligible designated beneficiaries, such as a surviving spouse or a minor child of the owner, may have different options.
RMDs are mandatory, but they are not completely inflexible. With planning, you can reduce the tax drag and make the withdrawals work with your broader retirement income strategy.
Tax withholding is another practical lever. You can often elect federal and state withholding on an IRA distribution. Withholding can help you avoid underpayment penalties, but it should be coordinated with your overall tax plan. Taking a large RMD late in the year without withholding can create an unwelcome April surprise.
RMD rules sit at the intersection of tax planning, investment income, and retirement security. Bartley Insurance Services can help you identify which accounts are subject to RMDs, review deadlines, and coordinate distributions with your broader retirement income plan. That includes looking at how annuities, life insurance, and other insurance-based strategies may fit alongside your IRA and employer plan withdrawals.
A review can also uncover planning gaps. You may have an old 401(k) that needs separate attention, a beneficiary form that no longer matches your wishes, or a Roth conversion window that is closing. Bartley Insurance Services can help you organize the details and work with your tax and legal professionals so that everyone is using the same assumptions. The goal is not just to avoid penalties, but to make your retirement income more predictable and tax-efficient.
If you are approaching your RMD age, already taking RMDs, or inheriting a retirement account, do not wait until December to review the rules. A proactive conversation can clarify your obligations and reveal opportunities. Bartley Insurance Services is ready to help you understand the options and build a plan that fits your life.
Required Minimum Distributions are a permanent part of retirement planning for many savers. The rules have changed, the deadlines can be confusing, and the penalties are real. But an RMD is also a chance to be intentional about income, taxes, charitable giving, and legacy planning. Start with the correct applicable age, confirm your account balances, calculate each RMD carefully, and set a calendar reminder well before December 31.
If the process feels overwhelming, get help before a mistake becomes expensive. Bartley Insurance Services can help you understand RMD rules, coordinate your retirement accounts, and keep your broader financial plan on track. A little planning today can make your required withdrawals feel less like a burden and more like one more tool for a secure retirement.