Every dollar in your traditional 401(k) or IRA was deposited pre-tax. The IRS always gets its cut — RMDs are the mechanism. Starting at age 73, you must withdraw a minimum amount each year, calculated by dividing your account balance by an IRS life expectancy factor.
RMD Rules for 2025
- •Starting age: 73 (raised from 72 under SECURE 2.0 Act)
- •Accounts affected: Traditional IRA, 401(k), 403(b), 457(b), SEP-IRA, SIMPLE IRA
- •NOT required: Roth IRA (no RMDs during owner's lifetime), Roth 401(k) after 2024
- •Deadline: December 31 each year (first RMD can be delayed to April 1 of the year after turning 73)
- •Penalty for missing: 25% of the amount that should have been withdrawn (reduced to 10% if corrected quickly)
How to Calculate Your RMD
RMD = Account Balance (Dec 31 prior year) ÷ Life Expectancy Factor. The life expectancy factor comes from the IRS Uniform Lifetime Table. At age 73, the factor is 26.5. At age 80, it's 20.2. At age 90, it's 12.2. Example: $500,000 balance at age 73 → $500,000 ÷ 26.5 = $18,868 required withdrawal.
Strategies to Reduce RMD Tax Impact
- •Roth conversions before 73: Convert traditional IRA funds to Roth now to reduce future RMD amounts
- •Qualified Charitable Distribution (QCD): Donate up to $105,000/year directly from IRA to charity — counts toward RMD but excluded from taxable income
- •Still working exception: If you're still employed at 73, you can delay RMDs from your current employer's 401(k)
- •Spread RMDs across multiple IRAs: Each IRA has a separate RMD, but you can take the total from any one
Take RMDs early in the year rather than waiting until December. If the market rises, your December withdrawal would be based on a higher balance. Early withdrawal also gives you time to reinvest in a taxable account.
The best RMD strategy is planned years before age 73 — through Roth conversions in your 60s that shrink the taxable account. By the time RMDs begin, the goal is for your traditional IRA balance to be as small as possible.