Required minimum distributions (RMDs)

Required minimum distributions: The deal on RMDs


Saving money in an IRA or 401(k) is one of the best ways to prepare financially for retirement.

These investment accounts offer tax benefits, including deferral of taxes on funds contributed to traditional IRAs and 401(k)s.

But there’s a provision in IRAs and 401(k)s that can trip up unsuspecting retirees. Known as required minimum distributions (RMDs), this requires retirees to start withdrawing money and paying taxes on withdrawals when they reach a certain age.

What is a required minimum distribution (RMD)?

The RMD rule is fairly simple. When you reach a certain age – 73 (72 if you reached age 72 before Dec. 31, 2022) – you must start withdrawing a minimum amount of money from certain tax-advantaged retirement plans.

The required amount is based on your account balance at the end of the previous year, divided by the applicable distribution period or an age-based life expectancy factor to arrive at your RMD.

Just like all funds withdrawn from qualified retirement accounts, RMDs are considered taxable income. Therefore, taking RMDs will result in higher reported income on your tax return and, thus, higher income taxes during the year they are taken.

The penalties for failing to comply with RMD provisions for IRAs and 401(k)s are steep. If you don’t take RMDs when you’re supposed to, you could be penalized 50 percent of the amount of the distribution that should have been taken.

Which retirement plans do RMD rules apply to?

RMD rules generally apply to pre-tax retirement accounts, meaning those for which you received a tax deduction for your contributions. Applicable retirement plans include:

  • 401(k) plans
  • 403(b) plans
  • 457(b) plans
  • Traditional IRAs
  • SEP IRAs
  • Profit-sharing plans
  • Other defined contribution plans

RMDs apply to the original account owner, as well as any beneficiaries who may inherit one of these types of accounts. The RMD rules also apply to inherited Roth IRAs, even though they don’t apply to the original account owner.

RMD rules have previously applied to Roth 401(k) plans, but only up until the end of 2023. Starting in 2024, all Roth accounts — including Roth 401(k) plans — are exempt from RMDs.

How do I calculate my required minimum distributions?

To calculate the amount of your RMD, you will divide the account balance on the prior December 31 by your life expectancy factor. The IRS has published life expectancy tables you can use for this purpose, which can be found here.

There are three different life expectancy tables. Use the one that applies to your situation:

  • Single life expectancy
  • Surviving spouse
  • Joint life and last survivor expectancy
  • Uniform lifetime

RMD calculation example

Suppose Jane, a 75-year-old woman, is trying to calculate her RMDs for 2023. Jane ended the previous year with a 401(k) balance of $500,000. Based on the appropriate RMD table — the Uniform Lifetime table — Jane’s distribution period is 24.6.

Once Jane has found her distribution period, she should divide her account balance by that number. When she divides her account balance of $500,000 by her distribution period of 24.6, Jane finds that her RMD for 2023 is $20,325.20.

Additionally, online calculators can help run the numbers for you to find your RMDs. For example, see the Required Minimum Distribution Calculator.

Special considerations for calculating RMDs

Your marital status and whether you’re the original owner of the retirement account will impact the RMD table you’ll use and, therefore, your RMD for each year. Most account holders will use the Uniform Table, Table III. That table applies to:

  • Unmarried owners
  • Married owners whose spouses aren’t more than 10 years younger
  • Married owners whose spouses aren’t the sole beneficiaries of their IRAs

If you don’t fall into one of those categories, you’ll use one of the other tables. For example, you’ll use Table II if you’re an owner whose spouse is more than 10 years younger and is the sole beneficiary of your IRA. You’ll use Table I if you’re an account beneficiary.

If you inherit a traditional IRA and the original owner had started taking RMDs at the time of death, you must continue to receive the distributions as previously calculated during the year of the original owner’s death. After this, the amount of your RMD will depend on your status as a beneficiary (e.g., a surviving spouse or minor child).

One rule change in 2022 for inherited IRAs is that the IRS included a transition rule for non-spouse beneficiaries who inherited an IRA prior to January 1, 2022, after RMDs have begun, and are using the Single Life Table. The transition rule has the life expectancies “reset” using the new tables.

This “reset” will look like this: The beneficiary will “go back” to the year after the owner’s death and find their single life expectancy as of their age in that year using the new table. Then, one year will be deducted from the new life expectancy for each year since the first distribution year to get the divisor for the relevant post-2021 year.

This can be complex as there are different rules for different years. Talk to your financial advisor and tax planning professional about your RMDs.

For more information about required minimum distributions, see this Empower table.

The bottom line

Retirement accounts like 401(k)s and IRAs have plenty of advantages, including their upfront tax savings and the ability to enjoy tax-deferred investment growth for decades. But eventually, those taxes will come due. And despite whether you need to access the funds at the age of 73 or not, the IRS will require that you start taking — and paying income taxes on — distributions.

If you’ve inherited a retirement plan or have a retirement plan and are nearing age 73, it’s important to understand how much you’ll be required to withdraw and how to go about taking those distributions. If you aren’t sure where you get started, consider enlisting the help of a financial professional.

For more information on the 2023 timeline, mailings, payment, and other factors related to required minimum distributions, see this Empower table.



Glossary Label
Required minimum distributions (RMDs)
Glossary Definition
RMDs are an annual amount retirees are required to withdraw from their tax-deferred accounts after reaching a certain age.

The Currency editors

Staff contributors

The CurrencyTM, a publication from Empower, covers the latest financial news and views shaping how we live, work, and play. We keep you current on ways to plan, save, and invest for life.

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