What to Know About Required Minimum Distributions
As retirement account owners move through their 70s, one important planning item is the required minimum distribution, or “RMD.” An RMD is the minimum amount that must be withdrawn each year from certain tax-deferred retirement accounts.
Which accounts are subject to RMDs?
RMDs generally apply to tax-deferred retirement accounts such as traditional IRAs, SEP IRAs, SIMPLE IRAs, and employer-sponsored plans such as 401(k), 403(b), and governmental 457(b) plans. Roth IRAs are not subject to lifetime RMDs for the original account owner. Beginning in 2024, designated Roth accounts in employer-sponsored plans, such as Roth 401(k) accounts, are also no longer subject to lifetime RMDs.
Important Ages and Dates
Summary: For many account owners, RMDs currently begin at age 73. (Under the SECURE 2.0 Act rules, the RMD starting age is scheduled to increase to 75 in 2033.) Under current rules, individuals who turn 73 generally have until April 1 of the following year to take their first RMD. After the first year, annual RMDs are generally due by December 31 each year.
January 31: IRA custodians generally must provide an RMD statement or offer to calculate the RMD for account owners who are required to take one.
April 1: Deadline for a first RMD if the account owner turned 73 in the previous year and did not take the first RMD by December 31.
December 31: Deadline for most RMDs. Clients who delayed their first RMD until April 1 may also need to take their second RMD by December 31, which could result in two taxable distributions in the same year.
How RMDs are calculated
In general, an RMD is calculated using the prior year-end account balance and a life expectancy factor from IRS tables. For 2026 RMDs, the IRS instructs account owners to use their age as of their birthday in 2026.
While IRA custodians may calculate or report RMD information, clients remain responsible for ensuring the correct total amount is withdrawn on time. This is especially important for clients with multiple retirement accounts, inherited accounts, and/or employer plans.
Penalties for missing an RMD
Failing to take the full RMD by the deadline can result in an excise tax. SECURE 2.0 reduced the potential penalty from the previous 50% rate, but the penalty can still be significant: generally up to 25% of the shortfall, with possible reduction if corrected in a timely manner.
Planning considerations
RMDs are generally taxable as ordinary income, so timing matters. Taking two RMDs in one tax year, for example, may increase taxable income and could affect Medicare premiums, taxation of Social Security benefits, or other income-based items. Taxpayers may also want to consider whether qualified charitable distributions, tax withholding, Roth conversion strategies, or coordinated withdrawal planning make sense for their situation.
Bottom line
RMD rules are date-sensitive, and the consequences of missing a deadline can be costly. If you are – or are approaching – age 73 or older, inherited a retirement account, or are unsure which accounts are subject to RMDs, you should review your accounts early in the year and consult PPG Partners and your financial advisor before year-end.
