Tax-deferred accounts such as traditional IRAs and 401(k) plans allow workers to delay taxes on qualified distributions, provided they meet income-based eligibility requirements. But the government will not let you withhold tax payments indefinitely.
Upon reaching a certain age, individuals with a tax-deferred retirement account must begin taking required minimum distributions (RMDs), meaning they must withdraw a percentage of the account balance each year. Any contributions and investment gains are subject to income tax.
Read on to learn more about RMDs, including when they begin and how to calculate the withdrawal amount for a retirement account with a balance of $500,000.
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Which types of retirement accounts are subject to required minimum distributions (RMDs)?
A required minimum distribution (RMD) is the smallest amount of money that retirees must withdraw from tax-deferred accounts each year. RMD rules apply to account holders and beneficiaries with the following plans:
Importantly, RMD rules do not apply to Roth accounts while the original owner is alive, but beneficiaries of Roth accounts must abide by RMD rules.
In general, account holders must take RMDs by Dec. 31 each year. The only exception is the first RMD can be postponed until April 1st. For instance, someone who turns 73 in 2026 could delay their first RMD until April 1, 2027. However, their second RMD must still be completed by Dec. 31, 2027.
At what age do required minimum distributions (RMDs) begin?
The age at which required minimum distributions begin depends on when you were born:
|
Account Holder's Birth Date |
Age When RMDs Begin |
|---|---|
|
Before July 1, 1949 |
70 ½ |
|
July 1, 1949, to Dec. 31, 1950 |
72 |
|
Jan. 1, 1951, to Dec. 31, 1959 |
73 |
|
After Dec. 31, 1959 |
75 |
Data source: Internal Revenue Service.
Anyone who does not take their RMD before the deadline will be penalized with an excise tax equal to 25% of the amount not withdrawn. The penalty can be reduced to 10% if the error is fixed within two years. The penalty can also be waived entirely if the account holder can show the shortfall was due to a reasonable error. In either scenario, you must file a Form 5329 with your tax return.
How much is the required minimum distribution (RMD) on a $500,000 retirement account?
Required minimum distribution amounts are calculated by dividing a life expectancy factor into the relevant account balance from Dec. 31 of the preceding year. As an example, RMD amounts due by Dec. 31, 2026, will be calculated using account balances from Dec. 31, 2025.
Individuals with more than one IRA must calculate the RMDs separately, but the total sum can be withdrawn from one account or spread over multiple accounts. However, that rule does not apply to 401(k) plans. RMDs for those accounts must be calculated and withdrawn separately.
The IRS publishes three life expectancy tables. Beneficiaries use Table I (Single Life Expectancy). Account holders whose spouses are their sole beneficiaries and at least 10 years younger use Table II (Joint and Last Survivor Life Expectancy). All other account holders use Table III (Uniform Lifetime).
This table shows an abbreviated reproduction of Table III (Uniform Lifetime).
|
Age in Current Year |
Distribution Period |
|---|---|
|
73 |
26.5 |
|
74 |
25.5 |
|
75 |
24.6 |
|
76 |
23.7 |
|
77 |
22.9 |
|
78 |
22.0 |
|
79 |
21.1 |
|
80 |
20.2 |
Data source: Internal Revenue Service. Uniform Lifetime Table.
I use the table in these three examples:
- Tim will turn 73 in 2026. He had $500,000 invested in a traditional 401(k) plan as of Dec. 31, 2025. His RMD amount is calculated as $500,000 divided by 26.5, which equals $18,868. As a reminder, because this will be Tim's first RMD, he can delay the withdrawal until April 1, 2027. However, his second RMD must still happen by Dec. 31, 2027.
- Julie turns 75 in 2026. She had $200,000 in a traditional IRA and $300,000 in a traditional 401(k) as of Dec. 31, 2025. The RMD on her IRA is calculated as $200,000 divided by 24.6, which equals $8,131. The RMD on her 401(k) is calculated separately as $300,000 divided by 24.6, which equals $12,196.
- Jordan turns 75 in 2025. He had $200,000 in one traditional IRA and $300,000 in another traditional IRA as of Dec. 31, 2024. The RMD amounts will be the same as in the previous example, but Jordan is allowed to combine the sums and withdraw the total (i.e., $20,327) from a single account.
