Required Minimum Distributions

Required Minimum Distributions — RMDs — are federally mandated annual withdrawals from tax-deferred retirement accounts that the IRS requires once you reach the applicable RMD age. Because money in traditional IRAs, 401k accounts, and similar tax-deferred vehicles was never subjected to income tax when contributed or while it grew, the IRS eventually requires that it be withdrawn — and taxed — according to a defined schedule. Missing an RMD or miscalculating the required amount triggers a significant penalty. Taking RMDs without a coordinated strategy can push taxable income into higher brackets, increase Medicare premium surcharges, affect Social Security taxation, and reduce the assets available for legacy or long-term care planning. Understanding how RMDs are calculated, which accounts require them, and how to integrate them into a broader income strategy is one of the most consequential planning tasks in retirement. Our resource on how does an IRA work covers the qualified account structure and tax deferral mechanics that create the RMD obligation, and our resource on sequence of returns risk covers the portfolio volatility context that makes RMD planning particularly consequential in early retirement years.

The RMD framework was significantly updated by the SECURE 2.0 Act of 2022. Under current law, the RMD start age is 73 for individuals born between 1951 and 1959, and 75 for individuals born in 1960 or later (the age-75 rule takes effect in 2033). These changes represent a meaningful extension of the tax-deferral window compared to prior law, giving many retirees additional years to allow qualified assets to grow before mandatory withdrawals begin. The IRS penalty for missing an RMD was also reduced under SECURE 2.0 — from 50% of the shortfall to 25%, and further to 10% if the error is corrected within two years by taking the missed amount and filing IRS Form 5329. While the penalty reduction is welcome, the remaining 25% excise tax on a missed RMD still represents a substantial consequence on large account balances. Our resource on in-service 401k transfer covers the strategic account consolidation that many retirees execute before RMD age to simplify compliance.

At Diversified Insurance Brokers, we help retirees coordinate RMDs with annuities, Social Security, pensions, and personal savings to build predictable, tax-efficient retirement income. The RMD is not merely a tax obligation — when planned proactively, it becomes an income tool. Coordinated with guaranteed income from annuities, Social Security timing, and strategic Roth conversion in pre-RMD years, required distributions can fund lifestyle spending while preserving tax-advantaged growth in other accounts and protecting against the longevity risk of outliving retirement assets. Our resource on how to not run out of money in retirement covers the longevity planning framework that makes RMD strategy a central component of sustainable retirement income.

Retirement Account Types and Their RMD Rules

Not every retirement account carries the same RMD requirements. The table below maps the most common account types against their RMD obligation, applicable start age, and key rules that distinguish each.

RMD rules reflect current law under SECURE Act and SECURE 2.0. RMD ages and rules are subject to future legislative change. Consult a qualified tax professional or financial advisor for guidance specific to your accounts, birth year, and tax situation. This table is for educational reference only.

How RMDs Are Calculated — The IRS Formula

The RMD calculation uses a straightforward formula: divide your retirement account balance as of December 31 of the prior year by your IRS life expectancy factor from the Uniform Lifetime Table (Table III). The Uniform Lifetime Table assumes a beneficiary 10 years younger regardless of your actual beneficiary’s age — except when a spouse who is more than 10 years younger is the sole primary beneficiary, in which case the Joint Life and Last Survivor Table applies and produces lower RMDs. The Uniform Lifetime factor for age 73 is 26.5, meaning a retiree with $500,000 in a traditional IRA at age 73 must withdraw at least $18,868 ($500,000 ÷ 26.5). At age 75 (factor 24.6), the same balance produces an RMD of $20,325. At age 80 (factor 20.2), that balance requires $24,752. The factor decreases — and therefore the required withdrawal percentage increases — each year, reflecting the shrinking life expectancy at each successive age. By age 85, the withdrawal rate reaches approximately 6.25% of the account balance; by age 90, approximately 8.20%. The calculation must be repeated each year using the prior December 31 balance and the updated factor for the new attained age. Because market volatility can significantly affect the December 31 balance, many retirees manage allocation risk carefully as RMD age approaches. Our resource on retirement annuity calculator helps model guaranteed income alongside RMD projections.

Which Accounts Are Subject to RMDs — and the Plan-Specific Rules That Matter

Traditional IRAs are subject to RMDs beginning at age 73 (or 75 for those born in 1960 or later), with one important flexibility: IRA RMDs can be aggregated. The total RMD due from all of a retiree’s traditional IRAs can be calculated in aggregate and then withdrawn from any one IRA or any combination — providing flexibility in which accounts to deplete and which to preserve longer. Our resource on how does an IRA work covers the IRA structure in full. Employer-sponsored plans — 401(k), 403(b), 457(b), and TSP — do not offer this aggregation flexibility. Each employer plan must satisfy its own RMD independently. Our resources on how does a 401k work, how does a 403b work, how does a 457b work, and how does a TSP work cover each plan’s structure and the specific rules that govern RMD compliance. The still-working exception allows employees who remain active with their current employer to defer RMDs from that employer’s plan until actual retirement — but this applies only to the current plan, not to IRAs or plans from former employers. Consolidating former employer plans into a rollover IRA before RMD age simplifies compliance by converting multiple mandatory-distribution accounts into one aggregatable IRA.

Accounts NOT Subject to RMDs — Where Tax-Deferred Growth Continues Indefinitely

Two primary account types escape the RMD requirement entirely during the original owner’s lifetime: Roth IRAs and non-qualified annuities. Roth IRA owners are never required to take distributions during their lifetime — the account can grow tax-free indefinitely and pass to beneficiaries without triggering the owner’s RMD clock. This makes Roth IRA conversions before RMD age a meaningful tax management strategy: every dollar converted from a traditional IRA to a Roth IRA reduces the future RMD-subject balance, and the converted amount grows tax-free without a future withdrawal mandate. Our resource on Roth conversions covers the strategic timing and tax implications of pre-RMD conversion planning. Non-qualified annuities — those funded with after-tax dollars outside of any IRA or employer plan — are not subject to RMDs. They accumulate on a tax-deferred basis without a mandatory withdrawal schedule, making them a tool some retirees use to reinvest RMD proceeds they do not need for living expenses. The tax treatment of non-qualified annuity withdrawals follows different rules than qualified accounts. Our resource on non-qualified annuity taxation covers the LIFO (last-in-first-out) withdrawal tax treatment that applies when non-qualified annuity funds are eventually accessed.

How RMDs Affect Your Retirement Income

For many retirees, RMDs become a primary — and sometimes unwanted — source of taxable income. Even if the funds are not needed for living expenses, the IRS requires the withdrawal, and the distribution increases adjusted gross income for the year. This matters beyond the immediate tax bracket: higher AGI from RMDs can push Social Security benefits from 50% to 85% taxable, trigger IRMAA Medicare premium surcharges, affect the taxation of qualified dividends and capital gains, and reduce eligibility for certain deductions and credits. The compounding effect of RMD-driven income increases is one of the reasons tax planning in the years before RMD age — specifically Roth conversion analysis and income bracket management — is so valuable. Our resource on Social Security services covers the coordination between Social Security income timing and RMD planning. Because annuity income is taxed differently depending on whether it comes from a qualified or non-qualified contract, understanding the tax treatment before layering multiple income sources is essential. Our resource on how annuities are taxed in retirement covers the full qualified and non-qualified annuity tax framework as it interacts with RMD obligations.

Coordinating RMDs With Annuities

Whether and how annuities interact with RMDs depends entirely on how the annuity is funded. A qualified annuity — one funded with IRA or employer plan dollars through a rollover — is subject to RMDs in the same way as any other traditional IRA. However, once a qualified annuity is annuitized (converted to a stream of guaranteed income payments), those regular payments typically satisfy the RMD requirement automatically if the payment amount meets or exceeds the calculated minimum — a feature that simplifies compliance and turns the RMD into a structured, predictable income stream. Our resource on guaranteed income from annuities covers the income structure that can satisfy RMDs. For retirees repositioning qualified assets into an annuity before or during RMD age, how the transfer is executed determines whether a taxable event occurs. Our resource on how to transfer an IRA to an annuity covers the mechanics of a properly executed transfer, and our resource on what is a direct rollover covers the specific transfer method that avoids triggering immediate taxation. Income riders attached to deferred annuities can also create structured withdrawals that align with RMD schedules — our resource on what is an income rider covers how these riders function, and our resource on what is the best retirement income annuity covers how to compare income-oriented annuity designs for RMD coordination. Our resource on lifetime income annuity options covers the full spectrum of products available.

The QLAC Strategy — Deferring RMDs on a Portion of Your IRA

A Qualified Longevity Annuity Contract (QLAC) is a specific type of deferred income annuity that can be purchased inside a traditional IRA or qualified plan and used to defer RMDs on the amount allocated to the QLAC. Under current law, up to a defined dollar limit (inflation-indexed, currently approximately $200,000) of an IRA balance can be placed in a QLAC, and that amount is excluded from the RMD calculation until the QLAC’s income start date — which must begin by age 85. This means a retiree with a $1 million IRA who allocates $200,000 to a QLAC calculates RMDs only on the remaining $800,000 for the deferral period — reducing mandatory taxable withdrawals during the interim years while providing a contractually guaranteed income stream that begins at an advanced age. The QLAC strategy is most valuable for retirees who do not need the full RMD amount for living expenses and want to reduce taxable income in early RMD years while securing income protection against the risk of living into their late 80s and 90s. Our resource on what is a QLAC covers the mechanics, limits, and planning applications of this strategy in detail. For retirees evaluating whether qualified assets should also fund long-term care insurance premiums, our resource on can you use qualified funds for long-term care insurance covers that intersection.

Qualified Charitable Distributions — Satisfying RMDs Tax-Free

For IRA owners age 70½ or older, a Qualified Charitable Distribution (QCD) allows up to $108,000 per individual (indexed for 2026) to be transferred directly from a traditional IRA to a qualified charity — and that amount counts toward the year’s RMD while being completely excluded from adjusted gross income. The QCD is one of the most tax-efficient strategies available to charitable retirees: it satisfies the RMD obligation without adding the distribution to taxable income, avoiding the cascade of higher Social Security taxation, IRMAA Medicare surcharges, and bracket creep that an ordinary RMD would trigger. The QCD must be executed as a direct transfer from the IRA custodian to the charity — a check made payable to the charity and sent directly, not to the account owner. It works only from IRAs (not 401(k)s, 403(b)s, or other employer plans), and it cannot be used with Roth IRAs since those have no RMD. SECURE 2.0 also created a one-time QCD option to a charitable gift annuity of up to $55,000 per individual — allowing a retiree to satisfy a portion of an RMD while establishing a guaranteed income stream through the charity.

Integrating RMDs Into a Lifetime Income Strategy

RMDs should be treated not as a tax burden to minimize in isolation, but as one component of a coordinated retirement income plan. When RMD timing, Social Security claiming age, annuity income start dates, and Roth conversion windows are planned together in the years before and immediately after retirement, the combined tax efficiency and income stability can be dramatically better than addressing each in isolation. A common approach is to begin guaranteed annuity income at precisely the same time RMDs start — so that the annuity provides income the retiree actually wants to spend, while the RMD from remaining IRA assets satisfies the legal requirement and coordinates with the annuity’s income stream without creating excess taxable income. Retirees who own deferred annuities with income riders can also time income activation to coincide with RMD age, allowing the rider’s structured withdrawals to serve as the RMD vehicle. Our resource on annuity rescue plan covers how to evaluate and reposition an existing annuity that may not align with the current income and RMD strategy, our resource on annuity beneficiary and death benefits covers inherited annuity rules and estate implications including RMD treatment for beneficiaries, and our resource on get a 2nd opinion on your annuity quote covers how to evaluate any existing or proposed annuity in the context of your RMD timeline. Our resource on annuities 101 covers the full annuity landscape for readers who are new to using annuities in retirement income planning.