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Required Minimum Distributions

As Benjamin Franklin once said, ‘nothing can be said to be certain, except death and taxes’. Retirement accounts, such as IRA, 401k and 403b accounts are funded with pre-tax money and grow tax deferred.  Uncle Sam eventually wants his bite of the apple.

What is a Required Minimum Distribution?

In order to force funds out and collect the tax revenue, the IRS requires you to take money from your tax-deferred accounts.  This is called a Required Minimum Distribution or RMD. RMDs come from pre-tax accounts and are taxed as ordinary income.

When do I have to start?

For those people born on or before June 30, 1949, you had to begin taking RMDs at age 70.5. With the Secure Act, RMDs for those born between July 1, 1949 and the end of 1950 started at age 72. The start ages continue to push out, with those born between 1951 & 1959, starting at age 73. For people born in 1960 or later, RMDs will begin at age 75.

As always, there are exceptions. In the first year your RMD is due, you can delay taking it until April 1st of the following year.  Keep in mind you will still have to take an RMD for the second year. As an example, if you are required to start taking RMDs in 2024, you can delay taking your first RMD until April 1, 2025. You will then have to take your 2025 RMD in 2025 as well, resulting in 2 taxable distributions in 2025.

How Much Do I have to Take?

Once you know when you need to start, you might wonder how much do I need to take? There are two factors in determining your RMD. The first is the balance of your retirement account(s) as of December 31st of the prior year end. That balance is divided by the IRS’ Uniform Lifetime Table based on your age.


Ms. Smith was born in 1951.  She will need to start taking RMDs in 2024.  On December 31, 2023, her IRA had a value of $700,000.  Based on her age of 73, shows a factor of 26.5.   For 2024, she has to take a distribution of $26,415.09.

$700,000 / 26.5 =   $26,415.09

What if I don’t take it?

If you do not take your RMD, you will owe 25% of the under distribution as a penalty. If you miss it by mistake and correct it within 2 years, you may be able to reduce the penalty to 10%. The penalty has been lowered from the original 50% in recent years but is still a hefty penalty for skipping your RMDs.

What if I don’t need the additional income?

For some people, their RMD is a source of retirement income. But for others, they do not need the additional income. One option is to use Qualified Distribution to Charity or QCD. This option allows you to send your RMD directly to charity tax-free. For more details on QCDs, check out my article here.

Another strategy people use is to reduce the size of their tax-deferred accounts prior to their RMD start date. This strategy is called, Roth Conversion. To learn more about this strategy, you can see, my colleague, Alex Greer’s article HERE.

Special Rules

As with everything, there are some exceptions and special rules.

If you are still working and have assets in your employer’s retirement account, you can delay taking RMDs until the year you retire, as long as you are less than a 5% owner. You would still have to take RMDs on any IRAs or employer accounts where you do not currently work.

If you and your spouse are more than 10 years apart in age, and your spouse is the sole beneficiary of the account, you can use the Joint Life and Last Survivor Expectancy table to calculate your RMD. This will allow you to take a smaller amount for your RMD each year, than you would typically take under the Uniform Lifetime Table III.

RMDs are note required from Roth IRAs. As of 2024, RMDs are no longer required from Roth 401k or Roth 403b plans.

Inherited IRAs have their own rules related to RMDs.  Be on the lookout for a future article about all things inherited IRA.

In navigating the intricacies of retirement planning, understanding RMDs is paramount. As the nuances and complexities persist, our team of CERTIFIED FINANCIAL PLANNER™ professionals at Pathfinder are here to help guide you forward, and that includes how and when to take your RMD. Don’t hesitate to give us a call at 919.463.0018 or email our team with any questions that you may have!


Advisory services offered through Commonwealth Financial Network®, a Registered Investment Advisor.