Once you reach age 73, the IRS requires that you begin to withdraw from certain tax-deferred retirement accounts like a 401(k), 403(b), traditional IRA, and thrift savings plans. These withdrawals are called required minimum distributions (RMDs), and they're in place because you receive a tax break up front when you use these accounts, with the intention you'll pay taxes on the back end in retirement.
To determine how much you're required to withdraw, there are two things you need to know: the value of these accounts at the end of the previous year, and your life expectancy factor (LEF), which the IRS provides for every age. Once you know those, you simply divide your account value by your LEF.
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To see it in action, let's see the RMD for someone with $1 million in their retirement account(s) at the end of 2024. Based on that, below are the RMDs for people aged 73 to 80:
| Age | Life Expectancy Factor | Required Minimum Distribution (balance divided by LEF) |
|---|---|---|
| 73 | 26.5 | $37,736 |
| 74 | 25.5 | $39,216 |
| 75 | 24.6 | $40,650 |
| 76 | 23.7 | $42,194 |
| 77 | 22.9 | $43,668 |
| 78 | 22.0 | $45,455 |
| 79 | 21.1 | $47,393 |
| 80 | 20.2 | $49,505 |
Data source: IRS. Required minimum distributions rounded up to the nearest dollar. Table by author.
These LEFs are based on someone who uses the uniform lifetime table, which applies to everyone except those whose sole beneficiary is their spouse, who is more than 10 years younger than them.
The penalty for not taking your RMDs is 25% of the amount you failed to withdraw. If you correct your mistake and take your RMD within two years of the missed deadline, the penalty drops to 10%.
