RMD rules for 401(k) plans
RMD rules require that workers begin taking RMDs by April 1 of the year after the account holder turns 73. The Secure Act 2.0, which passed in December 2022, increased the age from 72 to 73.
RMDs must be taken not just from 401(k) plans but from other retirement plans, including different types of IRAs. These include SEP and SIMPLE IRAs, as well as from 403(b)s, 457(b)s, profit-sharing plans, and other defined contribution plans. The amount of your RMD is based on your account balance and life expectancy.
The IRS provides worksheets and tables to calculate RMDs. If you do not take your RMD, you'll face a 25% penalty on whatever amount you fail to withdraw. If you act quickly to correct this mistake, the penalty may be reduced to 10%. (For 2022 and previous tax years, the penalty was 50%, but the Secure Act 2.0 decreased the fine.)
So if you were supposed to take a $5,000 RMD in 2022 (for taxes that were due in April 2023) and you don't remove any money from your 401(k), you would have owed $2,500. But in 2025, your penalty would only be $1,250 (for taxes that are due in April 2026).
Exceptions to RMDs
Although there's generally no flexibility when it comes to 401(k) RMDs, there is one exception. If you're still working for the company sponsoring your plan by the time you turn 73 (previously 72) and you don't own 5% or more of that company, you may be able to avoid RMDs for as long as you remain employed -- although not all plans allow this.
Once you leave that company, however, you'll need to start taking withdrawals. Also, keep in mind that this exception applies to 401(k)s only. If you have an IRA in addition to your 401(k), you'll need to take your RMDs regardless of whether you're still working at the time.
