How RMDs Are Calculated: The Table, the Deadline, the Penalty

A required minimum distribution is one division: last year's December 31 balance, divided by an IRS number that depends only on your age. There's no investing skill involved and no choice in the amount. What trips people up is the surrounding machinery — which balance date counts, when the clock starts, what the penalty is now, and how the withdrawal ripples into Medicare premiums two years later.

What is an RMD, in one paragraph?

Money in a traditional IRA or 401(k) has never been taxed. The government let it compound tax-deferred on the condition that you eventually withdraw it and pay up. The RMD is the enforceable version of "eventually": once you reach the RMD age, a minimum amount must leave the account every year, taxed as ordinary income on withdrawal. Miss the minimum and the IRS charges an excise tax on the shortfall.

The formula, and the one date that matters

RMD = December 31 balance (prior year) ÷ distribution period for your age

The distribution periods come from the IRS Uniform Lifetime Table in Publication 590-B, last overhauled in 2022 to reflect longer lifespans. Each age from 72 up has one factor:

Two details do the heavy lifting. First, the balance is a snapshot: December 31 of last year, regardless of what the market has done since. Second, the factor shrinks each year, so the required percentage climbs on autopilot — a flat half-million-dollar balance gets drained at 3.65% a year at 72 but 8.2% a year at 90.

Run your own numbers on the RMD calculator — it carries the full table from 72 to 120.

When do RMDs start?

The starting age has moved three times in six years, which is why the internet is full of contradictory answers:

• 70½ — the old rule, still what many pre-2020 articles say.
• 72 — the original SECURE Act, for people born before July 1, 1949 (who've all aged past it by now).
• 73 — SECURE 2.0, effective 2023, for people born 1951 through 1959. This is the current rule.
• 75 — for people born in 1960 or later, effective with distribution year 2033.

Your first RMD covers the year you reach that age. If you were born in 1955, you turn 73 in 2028 and take your first RMD for 2028, by December 31, 2028 — or April 1, 2029, if you invoke the delay (more on why that's usually a mistake below).

Which accounts have RMDs?

• Traditional, SEP, and SIMPLE IRAs: yes. You can total the balances across all your IRAs and take the combined RMD from any one of them.
• 401(k), 403(b), 457 plans: yes, but each plan's RMD must come out of that plan. Still working for the employer? Many plans exempt you until retirement, a loophole IRAs don't have.
• Roth IRA: never, during the owner's lifetime.
• Roth 401(k): required before 2024; SECURE 2.0 eliminated RMDs starting 2024, and rolling into a Roth IRA works too.
• Inherited accounts: different rules entirely — typically the 10-year rule or the Single Life Expectancy Table, not the table above.

What happens if you miss one?

The excise tax is 25% of the shortfall, and it drops to 10% if you correct the miss within the correction window — withdraw the missing amount and file Form 5329. This used to be a 50% penalty, one of the most brutal in the tax code, and the reform is real relief: skip a $20,000 RMD, catch it, and the bill is $2,000 rather than $10,000. The realistic scenario isn't forgetting; it's a partial shortfall from an account you forgot you had. Old 401(k)s from past employers are the classic source.

The April 1 trap

You're allowed to delay your first RMD to April 1 of the following year. It's usually a bad idea, because the second RMD isn't delayed with it. Take the 2028-first-RMD example: delay to April 1, 2029 and you owe both the 2028 RMD and the 2029 RMD inside calendar 2029. Two distributions in one tax year means stacked income — potentially a higher bracket, a bigger tax on Social Security benefits, and a shot at an IRMAA surcharge. Unless you're bridging to a low-income year, take the first one on time.

How RMDs collide with IRMAA

Every dollar of RMD is ordinary income, and Medicare sets its income-related surcharges (IRMAA) from your MAGI two years back. The 2025 brackets start at $106,000 single / $212,000 married, with premiums stepping from the standard $185 a month up to $628.90 at the top. One dollar over a line buys the entire surcharge for the bracket — there's no phase-out.

A large RMD can push you over a line you'd otherwise sit under, and unlike most tax planning, you can't undo a December distribution in April. This is why the RMD years are usually too late for the best moves. The productive window is the gap between retirement and RMD age: low-income years where a Roth conversion can move money out of the future-RMD base permanently, since Roth accounts don't have RMDs. Our Roth conversion timing guide shows the bracket math; the retirement calculator can sanity-check whether your total drawdown plan holds.

Practical checklist for RMD season

1. Ask each custodian for last December 31's balance — the statements arrive in January.
2. Calculate per account (or per IRA aggregation), using the age you turn this year.
3. Decide whether to take it as a lump, monthly, or in-kind (moving shares to a taxable account counts as a distribution).
4. Watch QCDs if you're charitable-minded: after 70½, up to $108,000 a year (2025, indexed) can go straight from an IRA to charity, satisfying the RMD without adding to MAGI.
5. Finish by December 31, and keep confirmation statements. Custodian error doesn't waive the penalty.

And take the January statement seriously even in strong markets — the December 31 snapshot means a late-year rally quietly raises next year's required withdrawal.

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