RMD Rules & Deadlines: What the IRS Requires and When

Frank spent 40 years building his retirement savings. He contributed to his 401(k) religiously, watched the balance grow, and felt proud when it crossed $1 million. He'd done everything right — or so he thought.

At 72, Frank got confused. He'd heard the RMD age was changing. Was it 72? 73? 75? He thought he remembered something about a grace period for the first year. Rather than figure it out, he decided to wait until he had time to research properly.

That delay cost him $17,500.

Frank's RMD for the year he turned 73 was $38,000. When he finally realized he'd missed it — 14 months later — the penalty was 25% of what he should have withdrawn. That's $9,500 gone. And because he also missed his second year's RMD by the time he caught the error, the total penalty climbed higher.

"I knew the rules were important," Frank said. "I just didn't think one year of confusion would matter that much."

The RMD rules aren't complicated once you understand them. But they're absolutely unforgiving if you don't.

When the clock starts

The age at which RMDs begin has shifted twice in recent years, creating confusion for people like Frank who remember older rules.

If you were born before 1951, your RMDs began at 72 — and you should already be taking them. If you were born between 1951 and 1959, your RMDs begin at 73. If you were born in 1960 or later, you get a slight reprieve: RMDs don't start until 75.

Frank was born in 1951, which meant his RMD requirement began in the year he turned 73. He'd heard about the SECURE 2.0 changes raising the age to 75, but that only applied to people born in 1960 or later — not him.

The starting age determines when the first RMD is due, but there's flexibility in that first year. Your initial RMD can be taken anytime during the year you reach RMD age, or you can delay it until April 1 of the following year. This "grace period" for the first RMD — and only the first — creates a planning opportunity and a potential trap.

If you delay your first RMD until April 1, your second RMD is still due by December 31 of that same year. That's two RMDs in one calendar year, potentially doubling your taxable income and pushing you into higher brackets. For most people, taking the first RMD during the first year makes more sense than bunching two distributions into year two.

Every RMD after the first is due by December 31 of the applicable year. No extensions. No exceptions.

Which accounts have RMDs

Most tax-advantaged retirement accounts eventually require distributions. Traditional IRAs, Traditional 401(k)s, 403(b)s, 457(b)s, SEP IRAs, and SIMPLE IRAs all mandate RMDs once you reach the applicable age.

Roth accounts have a critical distinction. Roth IRAs have no RMDs during the owner's lifetime — you can leave money in a Roth IRA indefinitely, letting it grow tax-free for your heirs or for later use. Roth 401(k)s, however, do have RMDs — but you can avoid them by rolling your Roth 401(k) into a Roth IRA before the requirement kicks in. This is one of the strongest arguments for rolling a Roth 401(k) to a Roth IRA when you leave an employer.

Inherited accounts have their own rules, significantly changed by the SECURE Act. Non-spouse beneficiaries generally must withdraw the entire inherited account within 10 years. Whether annual distributions are required during that decade depends on whether the original owner had started RMDs — a complexity that continues to generate IRS guidance and taxpayer confusion.

How the calculation works

The formula is straightforward: take your December 31 account balance from the prior year and divide by your life expectancy factor.

The IRS publishes life expectancy tables that determine your factor. For most people, the Uniform Lifetime Table applies. At age 73, the factor is 26.5, meaning you withdraw about 3.8% of your balance. At 80, the factor drops to 20.2 — about 5%. At 90, it's 12.2 — roughly 8.2%.

The declining factor creates rising withdrawal percentages. Each year you must take a larger slice of your remaining balance. Even if markets decline and your balance shrinks, the rising percentage often keeps dollar-amount RMDs stable or increasing.

A special table applies if your spouse is your sole beneficiary and more than 10 years younger. The Joint Life and Last Survivor Expectancy Table produces a higher factor (lower withdrawal percentage), reducing annual RMDs during your joint lifetime.

For inherited accounts, the Single Life Table applies to beneficiaries calculating annual distributions — when those are required at all under current rules.

The aggregation rules: where flexibility exists and where it doesn't

Multiple accounts create complexity, but the aggregation rules provide some flexibility for IRAs that doesn't exist for 401(k)s.

If you have multiple Traditional IRAs, calculate the RMD for each account separately based on its December 31 balance. Add up all the individual RMDs. Then withdraw that total from any single IRA or combination of IRAs you choose. You might calculate RMDs of $15,000, $8,000, and $12,000 from three IRAs, totaling $35,000 — then withdraw the entire $35,000 from whichever account makes the most sense for your investment strategy or tax planning.

401(k) accounts don't allow this flexibility. Each 401(k) must satisfy its own RMD independently. If you have two 401(k)s from former employers, you must withdraw from each one separately to meet each account's requirement.

This distinction strongly favors consolidating old 401(k)s into a single IRA before RMD age. You gain aggregation flexibility, simplify record-keeping, and reduce the risk of forgetting an account and missing a deadline.

The penalty for mistakes

The penalty for failing to take an RMD used to be 50% of the shortfall — one of the harshest penalties in the tax code. SECURE 2.0 reduced it to 25%, which is still severe. Miss a $30,000 RMD, and you owe $7,500 in penalties on top of whatever taxes you'd owe anyway.

There's a partial escape valve: if you correct the shortfall within a "correction window" (generally by the end of the second year after the RMD was due), the penalty drops to 10%. Still painful on a $30,000 shortfall — $3,000 — but better than $7,500.

The IRS can waive penalties entirely for "reasonable cause." Historically, they've been fairly lenient with first-time mistakes by taxpayers who quickly correct the error and can demonstrate the failure was inadvertent. You'll need to file Form 5329, take the missed distribution, and attach a letter explaining what happened and how you've corrected it.

Frank's situation was complicated by missing two years. His first-year penalty was reduced because he corrected quickly once he realized the mistake. But the compounding confusion — and his hesitation to seek help — turned a $9,500 problem into something larger.

Strategic considerations beyond compliance

Meeting the deadline is the minimum requirement. Smart planning goes further.

Qualified Charitable Distributions let you donate directly from your IRA to charity, with the donation counting toward your RMD but not toward your taxable income. For those age 70½ or older who give to charity anyway, QCDs are enormously efficient. Up to $105,000 per year can flow from IRA to charity tax-free, satisfying RMD requirements while reducing AGI.

The timing of your first RMD deserves specific analysis. Delaying to April 1 of the following year makes sense only if your first year has unusually high income (perhaps your last year of work) and year two will be lower. For most retirees, taking the first RMD in the first year prevents bracket-jumping from two distributions in year two.

Roth conversions before RMDs begin reduce the balance that drives future required withdrawals. Every dollar converted is a dollar that leaves your Traditional IRA and enters an account with no RMD requirement. The tax you pay on conversion is often lower than the tax you'd pay on forced withdrawals years later at higher balances and potentially higher brackets.

Account consolidation before RMD age simplifies everything. Track down old 401(k)s and roll them to a single IRA. You'll have one calculation, one withdrawal to make, and one deadline to remember. Frank's confusion was partly caused by accounts scattered across multiple institutions — each with its own requirements and its own communication patterns.

A year-by-year approach

Successful RMD management is an annual process, not a one-time calculation.

In January, note your December 31 account balances. Calculate your RMD for the year using those balances and your current age. If you have multiple accounts, determine whether to aggregate (IRAs) or satisfy separately (401(k)s).

By mid-year, decide how you'll satisfy the RMD — which investments to sell, whether to take monthly or lump-sum distributions, whether to use QCDs. If you're charitably inclined, set up QCD arrangements with your IRA custodian.

By November, verify you're on track. If you've been taking monthly distributions, confirm the year-to-date total will meet your requirement. If you've been waiting to take a lump sum, make sure it happens in time to process before December 31.

By December 31, your RMD must be complete. "Complete" means the money has left your retirement account — not that you initiated the transfer, but that it's actually distributed. Allow processing time; most custodians recommend requesting distributions by mid-December to ensure completion by year-end.

Frank's mistake was treating RMDs as something he'd figure out eventually. The successful approach is building RMD management into your annual financial routine — as regular and non-negotiable as filing your taxes.

Need help creating an RMD strategy that minimizes taxes? Connect with a retirement advisor who specializes in distribution planning.