RMDs Without the Panic: The Complete Guide
Required Minimum Distributions, the tax bomb they can trigger, and how to defuse it a decade early.
Required Minimum Distributions, the tax bomb they can trigger, and how to defuse it a decade early.
What they are
Starting at age 73, the IRS makes you withdraw a minimum amount from traditional IRAs, 401(k)s, and similar 'qualified' accounts every year — and pay income tax on it. Roth IRAs are exempt during the owner's lifetime; as of 2024, Roth 401(k)s are too.
How they're calculated
Prior-year Dec 31 balance ÷ IRS Uniform Lifetime Table divisor for your age. At 73 the divisor is 26.5 (~3.77%). By 80 it drops to 20.2 (~5%). By 85, 16.0 (~6.25%). By 90, 12.2 (~8.2%). RMDs grow every year — as a percentage AND a dollar amount.
The tax bomb nobody warned you about
A $600K IRA at 63 can easily be $900K at 73. That means a much bigger forced withdrawal — fully taxed as ordinary income — landing on top of Social Security. The RMD itself is one tax; it can also push up to 85% of your Social Security into taxable territory (second tax); and it can spike MAGI over Medicare IRMAA tiers, raising Part B and D premiums two years later (third tax).
The 25% penalty
Miss an RMD and the shortfall is taxed at 25% (down from 50%). Correct it within two years and file Form 5329 and it drops to 10%. Automate the withdrawal — don't rely on memory.
The April 1 rule
Your first RMD is technically due April 1 of the year AFTER you turn 73. Wait until then and you'll take TWO RMDs that year — usually pushing you into a higher bracket. Most people take the first one in the year they turn 73 to spread the tax.
One IRA or all of them?
Calculate an RMD for each traditional IRA, but you can pull the total from a single IRA. 401(k)s and 403(b)s are different — each one must satisfy its own RMD separately.
The QCD shortcut
From age 70½, you can send up to $111,000/year (2026 limit, indexed annually) directly from an IRA to charity as a Qualified Charitable Distribution — it satisfies your RMD and doesn't count as taxable income.
10-year projection worksheet
1) Traditional IRA + 401(k) balance today: $______. Years until 73: ______. 2) Growth assumption (5–6% is reasonable): ______%. Projected balance at 73: $______. 3) Year-one RMD = balance at 73 ÷ 26.5. 4) Add RMD to Social Security and pension — does the total push you into a higher bracket, above an IRMAA tier, or past the 85% SS taxability threshold? If yes to any: a Roth conversion strategy in your 60s deserves a serious look.
The retiree who forgot his first RMD
Ray turned 73 in March. His 12/31 IRA balance was ~$480,000; his first RMD was ~$18,100. He figured he'd get around to it. Never did. Penalty at 25%: $4,525 (10% and $1,810 if corrected within two years with Form 5329). Ray now has his custodian auto-distribute every November. Fifteen minutes, saved the penalty forever.
The tax bill at 73 is written by the choices you make at 63. Automate the withdrawal. Model the next 10 years of tax — not just this one.
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