Aside from being a means to proactively save and invest for retirement, one of the best things about tax-deferred retirement accounts like 401(k)s, or traditional IRAs, is the tax break you receive for using the account. When you contribute to those accounts, you can deduct the contribution from your taxable income, saving you money on taxes owed that year.
Unfortunately, Uncle Sam and the IRS will always eventually want their cut; you receive a tax break on the front end, but you'll owe taxes on the back end when you withdraw from these accounts in retirement. And to avoid a situation where someone doesn't withdraw from these accounts at all to avoid those taxes, the IRS enacts required minimum distributions (RMDs).
Like many aspects of personal finances, the details surrounding RMDs and how they operate are fluid and often change throughout the years. As we head into 2026, here are a couple of those changes to be aware of now.
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How RMDs work
Before discussing the changes, it's important to understand how RMDs work so you can ensure you're approaching them correctly. The exact amount of your RMD depends on two factors: your age and your retirement account balance at the end of the previous year (so for 2026 RMDs, it would be the balance at the end of 2025).
Once you have those two pieces of information, the next step is looking at your life expectancy factor (LEF), which the IRS provides for you based on your age and marital status. For most people, it will be the LEF on the uniform lifetime table. The only exception: people whose sole beneficiary is a spouse who is more than 10 years younger than them.
After finding your LEF, divide your account value by that number to get the exact RMD. For example, someone using the uniform lifetime table who is 75 years old has an LEF of 24.6. If they had $1 million in their 401(k) at the end of 2024, their 2025 RMD would be $40,650.
If it's your first year taking RMDs, you have until April 1 of the following year. Any other time, you must take your RMDs by Dec. 31.
The age for RMDs is increasing
As part of the SECURE 2.0 Act, the age at which RMDs begin has been increasing. It used to be 70 1/2 for people born on or after July 1, 1949, but was later raised to 72. Then came the SECURE 2.0 Act, which raised it from 72 to 73 for people born on or after Jan. 1, 1951.
As it stands, people born after Dec. 31, 1959, will need to begin taking their RMDs at age 75.
For instance, if you turn 73 in 2026, you'll be required to begin RMDs. Since it's your first year, you'll have until April 1, 2027, to withdraw the required amount. However, your second distributions must be taken by Dec. 31, 2027, regardless. And every year afterward, they'll need to be taken by Dec. 31.
The penalties for missed RMDs became more lenient
Before the SECURE 2.0 Act, if you didn't meet your RMD requirements, the penalty would be 50% of the amount you failed to withdraw. Now, the penalty has been reduced to 25%. For example, if you needed to withdraw $10,000 and only withdrew $4,000 ($6,000 remaining), the penalty would now be $1,500 ($6,000 * 25%) instead of $3,000 ($6,000 * 50%).
The good news is that if you correct your mistake within two years -- by withdrawing the amount you were supposed to -- the penalty can be reduced to 10%.
To correct a missed RMD after the deadline, you must submit IRS Form 5329 with your tax return. If you made an honest mistake and you have a reasonable excuse (like health issues or having a faulty tax professional, for example), you can possibly have the penalty waived. It's never a guarantee, but the IRS does grant waivers more often than you may think.
