Required Minimum Distributions (RMDs) are mandatory annual withdrawals the IRS requires from most tax-deferred retirement accounts — including traditional 401(k)s and traditional IRAs — starting at a specific age. The rule exists because these accounts received a tax break on the way in, and the government eventually wants to collect tax on the money as it comes out.
Which accounts are affected
Traditional 401(k)s, traditional IRAs, and similar tax-deferred accounts are generally subject to RMDs. Roth IRAs, notably, are not subject to RMDs during the original account owner's lifetime, which is one of the meaningful differences covered in our Roth vs. traditional IRA guide. Roth 401(k)s have historically had RMD rules, though this has been an area where rules have shifted — worth checking current guidance for the specific account type.
The age RMDs begin
The starting age for RMDs has changed multiple times through recent legislation, moving from 70½ to 72 to a later age depending on birth year under more recent law changes. Because this specific age is exactly the kind of detail that changes with legislation, checking current IRS guidance or consulting a financial professional for your specific birth year is more reliable than relying on any single number.
How the amount is calculated
The RMD amount is generally calculated by dividing the account balance (as of the end of the previous year) by a life expectancy factor from an IRS-provided table, which changes based on age each year. This means the required withdrawal amount changes annually, generally increasing as a percentage of the balance in later years of retirement.
What happens to the money
An RMD must be withdrawn, but it doesn't have to be spent — it can be reinvested in a taxable brokerage account after the withdrawal (and the associated tax) is processed. Some retirees who don't need the income for living expenses simply reinvest RMDs elsewhere, accepting the tax hit as a required cost of the account structure.
Strategies some retirees use around RMDs
- Roth conversions before RMD age — converting some traditional retirement funds to a Roth IRA earlier in retirement (paying tax on the conversion) can reduce the traditional account balance subject to future RMDs, though this is a complex decision with its own tax implications worth discussing with a professional.
- Qualified charitable distributions — for those who are charitably inclined, directing an RMD (or part of it) directly to a qualified charity can, under certain rules, satisfy the RMD requirement without the amount counting as taxable income.
- Aggregating RMDs across similar accounts — in some cases, RMDs from multiple traditional IRAs can be combined and withdrawn from just one of them, though 401(k) RMDs generally must be taken separately from each plan.
RMD rules are among the more frequently updated areas of retirement account regulation, so specific ages and calculation details in this article should be verified against current IRS guidance rather than treated as permanently fixed numbers.