The SECURE 2.0 Act changed some of the rules governing Required Minimum Distributions (RMDs). However, much remains the same. Here's where things stand as of 2023.
Timing of your first RMD
The timing of your first RMD is based on your age. After Secure 2.0, individuals turning age 73 in 2023 will need to take their first RMD distribution this year or by April 1 of the following year. The table below covers what you should know about start dates for different kinds of accounts.
| Account type | Timing of first RMD |
|---|---|
| IRAs including traditional, SEP, and SIMPLE | April 1 of the following year after reaching RMD age |
| 401(k), 403(b), 457(b) plans, or other qualified plan | April 1 of the following year after reaching RMD age. However, if you are still employed at your RMD age, you may be able to delay your first RMD until April 1 of the year after you retire. A few other caveats apply: The exemption applies only to the account for your most recent employer, the plan must allow this exemption, and you cannot own more than 5% of a business. |
| Roth IRA | RMDs are NOT required |
| Roth 401(k), 403(b), or 457(b) (designated Roth account) | April 1 of the following year after reaching RMD age. However, if you are still employed at your RMD age, you may be able to delay your first RMD until April of the year after you retire. This exemption only applies to the account for your most recent employer, that plan must allow this exemption, and you cannot own more than 5% of a business. Note: Beginning in 2024, RMDs will no longer be required from these accounts. |
| Inherited retirement accounts | If the deceased has not taken their RMD, you must generally take a distribution for them by December 31 of the year of death. Beneficiaries can get an extension to the tax filing deadline and potential penalty waiver. The heir of the account may also be subject to their own RMDs. The RMD rules for inherited accounts are very complex. |
As you can see, you generally need to take your first distribution by April 1 of the year after you reach RMD age. Keep in mind, though, that if you wait, you will need to take two RMDs that year—and that could saddle you with more taxable income and therefore a bigger tax bill.
What about if you fail to take your RMD? For tax years 2023 onward, you may be subject to a 25% penalty for any amount not withdrawn. That said, if you correct the issue by taking the RMD, that penalty may be reduced to 10%.
RMD aggregation rules
You must determine your RMD for each account separately. However, in some situations you may be able to combine your RMD obligations from each account and take the full amount from a single account. The processes of combining RMDs is called aggregation.
| Account type | Aggregation rule |
|---|---|
| IRAs including traditional, rollover, SEP, and SIMPLE* | Yes, you can aggregate with other IRA accounts |
| 401(k) or other qualified pre-tax plan | No, each account must have its own RMD |
| Governmental 457(b) plans** | No, each account must have its own RMD |
| 403(b) plans | Yes, but only with other 403(b) accounts |
| Roth IRA | RMD is not required |
| Roth 401(k), 403(b), or 457(b) (designated Roth account) | Roth 401(k) and 457(b): No, each account must have its own RMD. Roth 403(b): Yes, but only with other Roth 403(b) accounts. Note: Beginning in 2024, RMDs will no longer be required from these accounts. |
How to calculate RMDs
You can use the worksheet below to calculate your RMD from a given account. Note: This table should not be used if your spouse is the sole beneficiary of your IRA and is more than 10 years younger than you. Refer to publication 590-B for Joint Life & Last Survivor Expectancy Table. Beneficiaries of inherited IRAs generally follow a Single Life Expectancy table.
Source: IRS Publication 590-B. For illustrative purposes only.
| Age | Distribution period (DP) |
|---|---|
| 73 | 26.5 |
| 74 | 25.5 |
| 75 | 24.6 |
| 76 | 23.7 |
| 77 | 22.9 |
| 78 | 22.0 |
| 79 | 21.1 |
| 80 | 20.2 |
| 81 | 19.4 |
| 82 | 18.5 |
| 83 | 17.7 |
| 84 | 16.8 |
| 85 | 16.0 |
| 86 | 15.2 |
| 87 | 14.4 |
| 88 | 13.7 |
| 89 | 12.9 |
| 90 | 12.2 |
| 91 | 11.5 |
| 92 | 10.8 |
| 93 | 10.1 |
| 94 | 9.5 |
| 95 | 8.9 |
| 96 | 8.4 |
| 97 | 7.8 |
| 98 | 7.3 |
| 99 | 6.8 |
| 100 | 6.4 |
| 101 | 6.0 |
| 102 | 5.6 |
| 103 | 5.2 |
| 104 | 4.9 |
| 105 | 4.6 |
| 106 | 4.3 |
| 107 | 4.1 |
| 108 | 3.9 |
| 109 | 3.7 |
| 110 | 3.5 |
| 111 | 3.4 |
| 112 | 3.3 |
| 113 | 3.1 |
| 114 | 3.0 |
| 115 | 2.9 |
| 116 | 2.8 |
| 117 | 2.7 |
| 118 | 2.5 |
| 119 | 2.3 |
| 120 and over | 2.0 |
Strategies for lowering RMDs
Of course, money you withdraw from a tax-deferred retirement account is generally taxable. And if you have a significant amount of tax-deferred savings when you hit RMD age, you could be in for a bit of a tax shock when you have to start taking withdrawals.
You do have some options, though:
- Qualified distributions before RMD age. In some cases, it makes sense to wait as long as possible to tap your tax-deferred assets, so they'll have more time for potential growth. However, if you have a large amount of tax-deferred savings, it could make more sense to start withdrawing them as soon as you can. By lowering your balance before you reach RMD age, your RMDs may not be as large when it's finally time to start them.
- Roth conversion. The idea here is to convert some of your tax-deferred savings into Roth savings. You'll have to pay taxes in the year of the conversion, but by lowering your tax-deferred account balance, you could potentially have smaller RMDs and gain a tax-free resource for future use (or to leave to legacy).
- Qualified charitable distribution. A QCD allows you to make tax-free donations of up to $100,000 a year directly from an IRA to a qualified charity, thereby satisfying all or part of your annual RMD from your IRA. After 2023, this amount will be indexed to inflation.
- Net Unrealized Appreciation. This is a tax strategy for people who own company stock in a qualified employer-sponsored retirement plan and are at least 59½ or separated from their employer. Taking advantage of this strategy may save you money and reduce your potential RMDs.
Use our RMD calculator to help you estimate your RMD or visit the RMD center for more information on automating your RMDs from schwab.com.
Find your Required Minimum Distribution.
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This document is a summary of information found in various federal tax publications and websites, including: the Internal Revenue Service (IRS) website, Revenue Procedure 2021-45v, and IRS Notice 2021-61. Limitations may apply to certain tax deductions, tax credits, or contributions to retirement plans, such as income limitations or limitations based on eligible expenses. For additional details and information, please consult the IRS website or work with a tax professional to ensure all rules and limitations are considered.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own situation before making any investment decision.
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Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
Roth IRA conversions require a 5-year holding period before earnings can be withdrawn tax free and subsequent conversions will require their own 5- year holding period. In addition, earnings distributions prior to age 59½ are subject to an early withdrawal penalty.
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