Retirement accounts like traditional IRAs and 401(k) plans let you deduct contributions from taxable income in the present, allowing you to save tax-deferred dollars, in exchange for paying income tax on the contributions (and any gains) in the future.
However, withdrawals cannot be delayed indefinitely. Tax-deferred retirement accounts are subject to required minimum distributions (RMDs), meaning account holders are obligated to make sufficient withdrawals each year upon reaching a certain age.
Like most topics in personal finance, RMDs can be complicated, especially because the passage of the Secure 2.0 Act in 2022 introduced new rules and modified others. Read on to learn when RMDs must start, which accounts are no longer impacted, and what happens if your RMD is not completed on time.
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1. RMDs begin at age 73 for retirees born between 1951 and 1959
When required minimum distributions (RMDs) begin depends on your birth date. The Secure Act of 2019 (also called the Secure 1.0 Act) increased the starting point from age 70 1/2 to age 72 for anyone born on or after July 1, 1949. The Secure Act of 2022 (also called the Secure 2.0 Act) increased the starting point from age 72 to age 73 for anyone born on or after January 1, 1951.
The chart below provides a consolidated view of those rules.
|
Account Holder's Birth Date |
Age When RMDs Begin |
|---|---|
|
Before July 1, 1949 |
70 1/2 |
|
July 1, 1949, to December 31, 1950 |
72 |
|
January 1, 1951, to December 31, 1959 |
73 |
|
After December 31, 1959 |
75 |
Data source: Internal Revenue Service.
Importantly, RMDs on traditional 401(k) plans and traditional IRAs (including SEP IRAs and SIMPLE IRAs) are mandatory once you reach the minimum age shown in the chart above even if you are still working. In general, RMDs must be completed by December 31, but the first one can be delayed until April 1 of the following year.
Here's an example: John turned 73 years old in 2025, so he must begin taking RMDs. He can delay the first withdrawal until April 1, 2026, but the second withdrawal must be taken by December 31, 2026. And all subsequent RMDs must be taken by December 31 of the applicable year.
2. Roth 401(k) plans and 403(b) plans are no longer subject to RMD rules
The Secure 2.0 Act eliminated required minimum distributions on Roth 401(k) plans and Roth 401(b) plans. Prior to the legislation, there was a discrepancy in that Roth IRAs were not subject to RMDs, while Roth 401(k) plans or Roth 403(b) plans were subject to RMDs.
Under current law, required minimum distribution rules no longer apply to dedicated Roth accounts while the original account holder lives. However, RMD rules do apply to Roth accounts once the account is inherited by a beneficiary.
3. RMDs amounts not withdrawn by the deadline are subject to a smaller excise tax penalty
RMDs are calculated by dividing the account balance from December 31 (in the prior year) by a life expectancy factor found in one of three tables published by the IRS. Using my previous example, John (who turned 73 in 2025) will calculate his RMD by dividing his account balance as of December 31, 2024, by the life expectancy factor listed on the applicable IRS table.
In most cases, the original account holder will use Table III (Uniform Lifetime) and beneficiaries will use Table I (Single Life Expectancy) to determine how much money must be withdrawn to satisfy the RMD rules. However, the account holder will use Table II (Joint and Last Survivor Life Expectancy) if their spouse is both their sole designated beneficiary and more than 10 years younger.
Before 2023, the IRS could assess a 50% excise tax on RMD amounts not withdrawn before the deadline. But the Secure 2.0 Act lowered the maximum penalty to 25%, and the excise tax can be further reduced to 10% if the error is corrected within two years. Nevertheless, the most prudent course of action is to ensure your RMDs are completed in a timely manner.
