You do the hard work of saving your money for retirement and choosing where it goes. But if you put it in a tax-deferred retirement account, then it's not all yours. You still owe the government a cut of your savings, and eventually, it makes you pay up.
Required minimum distributions (RMDs) are mandatory annual withdrawals the government forces you to take when you reach a certain age, and it's pretty important that you get them right. Here are the three main things you need to understand about them.
Image source: Getty Images.
1. Who has to take RMDs
You have to take RMDs beginning in the year you turn 73, but there are a few exceptions. You never have to take RMDs from Roth accounts, and you don't have to take one from your current employer's 401(k) if you're still working and own less than 5% of the company.
If you have multiple 401(k)s, you'll need to take an RMD from each one individually. That's not the case with IRAs. With IRAs, you have to calculate each RMD individually (more on that below), but you can withdraw all the funds from a single traditional IRA if you'd like. You must withdraw an amount equal to your total IRA RMDs, but you can take the funds from any traditional IRA(s) you like.
You generally must take RMDs by Dec. 31 of the year in question. However, the first year you have to take RMDs, you technically have until April 1 of the following year. For example, if you're turning 73 in 2026, you don't have to complete your first RMD until April 1, 2027.
2. How to calculate your RMDs
You'll need to look up your retirement account balance at the end of the previous year to calculate your RMD. For 2026, look for what the balance was as of Dec. 31, 2025. Your plan administrator should be able to help you locate this information if you're not sure how to find it.
Then, take that amount and divide it by the distribution period next to your name in the IRS's Uniform Lifetime Table. For example, if you're 73 and have $250,000 in a traditional IRA, you'd divide $250,000 by 26.5 (the distribution period for 73-year-olds) to get an RMD of $9,434 from that account. You are always free to withdraw more than this if you'd like.
3. The penalty for not taking your RMDs
Failing to take your RMDs as scheduled results in a 25% penalty on the amount you should have withdrawn. Using our previous example, if you failed to take your $9,434 RMD, $2,359 would go to the IRS as your penalty. That's almost certainly more than you would've paid in taxes if you took your RMD as scheduled.
Sometimes, mistakes happen, though. If you take your RMD within two years after the scheduled deadline and submit Form 5329 to the government, it will reduce the penalty to 10%. Or it may waive it entirely if you can prove that your failure to take your RMD was due to a reasonable error that you've taken steps to correct.
If you have any questions about your RMDs, reach out to a tax professional who can advise you on what to do. Don't put it off until the last minute. Act promptly so you have time to come up with a strategy that works best for you.
