RMD Calculator: Know Exactly What the IRS Requires

Patricia turned 73 last April. She knew something about required distributions — her financial advisor had mentioned them years ago — but the details had gotten fuzzy. How much did she actually need to withdraw? When exactly was the deadline? What happened to the withdrawal she'd already taken in February?

She called her brokerage, waited on hold for 40 minutes, and finally got answers. Her year-end balance had been $500,000. At age 73, her life expectancy factor was 26.5. Her RMD: $18,868. The withdrawal she'd taken in February counted toward it. She needed to take another $8,868 by December 31 or face a penalty of up to 25% of the shortfall.

"I had no idea the penalty was that high," Patricia said. "I almost forgot about it entirely. That would have cost me over $4,700."

Patricia isn't careless. She simply underestimated how precise and unforgiving the RMD rules are. The IRS doesn't send reminders. The deadline doesn't extend. And the penalty for mistakes is among the harshest in the tax code.

This is exactly why you need to know your number.

The deal you made with the IRS

Think of your Traditional IRA or 401(k) as a partnership agreement with the government. When you contributed, they said: "We'll let you skip taxes on this money now. It grows tax-free for decades. But eventually — when you reach a certain age — you must start paying us back."

Required Minimum Distributions are that payback schedule. Starting at age 73 (or 75 for those born in 1960 or later), the IRS requires you to withdraw a minimum amount every year. This isn't optional. You must take the money whether you need it or not. And you must pay income taxes on every dollar withdrawn.

The accounts subject to RMDs include Traditional IRAs, Traditional 401(k)s, 403(b)s, 457(b)s, SEP IRAs, and SIMPLE IRAs. Roth 401(k)s technically require RMDs too, but you can avoid them by rolling to a Roth IRA before the requirement kicks in. Roth IRAs, notably, have no RMDs during the owner's lifetime — one of their major advantages.

If you're still working past 73 and participating in your current employer's 401(k), you can delay RMDs from that specific plan until you retire. But this exception only applies to your current employer's plan, not to IRAs or old 401(k)s from previous jobs.

The calculation explained

The IRS formula is simple: divide your account balance by a life expectancy factor.

Your account balance is whatever it was on December 31 of the previous year. If your IRA was worth $500,000 on December 31, 2024, that's the number you use for your 2025 RMD — regardless of what the account is worth today.

The life expectancy factor comes from IRS tables and decreases each year as you age. At 73, the factor is 26.5. At 80, it's 20.2. At 85, it's 16.0. At 90, it's 12.2. The declining factor means your withdrawal percentage increases: roughly 3.8% at 73, rising to about 5% at 80, 6.3% at 85, and 8.2% at 90.

Patricia's calculation: $500,000 ÷ 26.5 = $18,868. That's the minimum she must withdraw. She can always take more — there's no maximum — but she cannot take less without facing penalties.

The penalty for missing an RMD used to be 50% of the shortfall. The SECURE 2.0 Act reduced it to 25%, or just 10% if you correct the mistake promptly. Still painful: a $10,000 shortfall costs $2,500 at minimum, $1,000 if you catch it quickly.

Why this number grows even when markets don't

The math creates a compounding problem that catches many retirees off guard.

The percentage you must withdraw increases each year. At 73, you withdraw about 3.8%. At 80, about 5%. At 90, about 8.2%. Each year, a larger share of your balance must come out.

Meanwhile, your account might still be growing. A $500,000 balance earning 7% returns grows to $535,000, even after your $18,868 RMD. Next year's RMD is calculated on a higher balance — and at a higher percentage. The dollar amount keeps climbing.

Patricia's first RMD was roughly $19,000. If her account grows modestly over the next decade, her age-83 RMD might exceed $40,000. That's $40,000 added to her taxable income whether she needs it or not, potentially pushing her into higher brackets, triggering Medicare surcharges, and maximizing Social Security taxation.

This is why Roth conversions before RMDs begin are so valuable. Every dollar converted is a dollar removed from the account that generates forced withdrawals. Patricia can't undo the past, but someone in their 60s reading this can plan ahead.

The aggregation rules matter

If you have multiple accounts, the aggregation rules determine how you satisfy your RMD.

For IRAs, you calculate the RMD for each account separately, then add them up. But you can withdraw the total from any single IRA or combination of IRAs. Three IRAs with RMDs of $10,000, $5,000, and $8,000 mean a total RMD of $23,000 — which you can take entirely from whichever IRA you choose.

For 401(k)s, each account must be satisfied separately. You cannot take your 401(k) RMD from your IRA, and you cannot satisfy one 401(k)'s RMD from another 401(k). If you have two 401(k)s with RMDs of $15,000 and $12,000, you must withdraw $15,000 from the first and $12,000 from the second.

This is a major reason to consolidate accounts before RMD age. Rolling old 401(k)s into a single IRA gives you flexibility about which investments to liquidate and simplifies compliance. Patricia consolidated three old 401(k)s and two IRAs into a single IRA at 70 — making her RMD management much simpler.

Planning beyond compliance

Knowing your RMD is table stakes. The real question is how to minimize its tax impact.

Qualified Charitable Distributions let you donate directly from your IRA to charity. Up to $105,000 per year counts toward your RMD but doesn't count as taxable income. For charitably inclined retirees, this is one of the most efficient strategies available.

Strategic timing of your first RMD can make a difference. You can take your first RMD anytime during the year you turn 73, or delay until April 1 of the following year. Delaying means two RMDs in year two — potentially pushing you into higher brackets. Usually taking in year one is better, but the right choice depends on your specific income pattern.

Roth conversions before RMDs begin reduce the account balance that drives future required withdrawals. Patricia wishes she'd converted $50,000 per year in her late 60s. At 12-22% tax rates then, she'd have paid far less than the 22-24% she's paying now on forced withdrawals.

The still-working exception can delay RMDs if you're employed past 73. Rolling old accounts into your current employer's 401(k) consolidates everything under the exception, deferring all RMDs until actual retirement.

When our calculator launches

You'll enter your account balances as of December 31, select your age, and immediately see your required distribution. For multiple accounts, the calculator will show both individual account requirements and the aggregated total with clear guidance on satisfaction rules.

Future year projections will show estimated RMDs at ages 75, 80, 85, and beyond — revealing the trajectory that surprises so many retirees. Tax impact estimates will show what you'll likely owe on the withdrawals at various rates.

Most importantly, the calculator will show how different strategies affect your lifetime RMD burden. How much would Roth conversions today reduce forced withdrawals later? What's the impact of delaying Social Security while accelerating withdrawals now? These forward-looking projections help you make decisions while you still have options.

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Patricia wishes she'd had these tools a decade ago. The RMD that surprised her this year was predictable — she just didn't run the numbers. Don't make the same mistake. Your future RMDs are already calculable. The question is whether you'll plan for them or let them plan for you.

Need personalized RMD planning assistance? Connect with a retirement advisor who specializes in tax-efficient distribution strategies.