For decades, you were told to save as much as possible in your 401(k) and IRA. Then, at a certain age, the government flips the script and forces you to take money out whether you need it or not. These mandatory withdrawals are called required minimum distributions, or RMDs, and getting them wrong is expensive. Here is exactly how they work in 2026 and how to keep the tax damage to a minimum.
When RMDs Start in 2026
Thanks to the SECURE 2.0 Act, the starting age has moved up in stages. According to Charles Schwab and IRS guidance, the rules now break down by birth year:
- Born between 1951 and 1959: your RMDs begin at age 73.
- Born in 1960 or later: your RMDs begin at age 75.
- Roth 401(k) and Roth 403(b) accounts no longer require lifetime RMDs at all, effective 2024.
Your first RMD is due by April 1 of the year after you reach your starting age. Every RMD after that is due by December 31. One trap to watch: if you delay that first withdrawal to April 1, you will end up taking two RMDs in the same calendar year, which can spike your taxable income and push you into a higher bracket.
“In this world, nothing is certain except death and taxes.”
Benjamin Franklin wrote that in a 1789 letter, as the National Constitution Center documents. RMDs are the moment that certainty arrives for your retirement accounts. The IRS has been waiting decades to tax the money you deferred, and now it finally collects.
How the Amount Is Calculated
Your RMD is not a flat figure. Each year you divide the prior year-end balance of your traditional retirement accounts by a life-expectancy factor from the IRS Uniform Lifetime Table. The older you get, the smaller the divisor, which means the percentage you must withdraw climbs over time. A 73-year-old withdraws a little under 4% of the balance; by your mid-80s that figure rises substantially, and by your 90s it climbs higher still.
A few practical points make the calculation less painful:
- You must calculate an RMD for each traditional IRA and 401(k) you own.
- You can aggregate IRA RMDs and take them from a single IRA, but you must take 401(k) RMDs from each plan separately.
- Your account custodian will usually calculate the figure for you, but you remain legally responsible for taking it.
The Penalty for Getting It Wrong
This is where RMDs bite. If you miss an RMD or take too little, the IRS imposes a 25% excise tax on the amount you should have withdrawn. The good news, also courtesy of SECURE 2.0, is that the penalty drops to 10% if you correct the mistake within two years and file the proper form. Still, a 25% penalty on top of ordinary income tax is a brutal price for an honest oversight, which is why automating your withdrawals with each custodian is so valuable.
Strategies to Soften the Tax Hit
RMDs are mandatory, but the tax pain around them is partly within your control. A few moves can make a real difference:
- Qualified charitable distributions (QCDs): If you are 70 and a half or older, you can send money directly from your IRA to charity, satisfying your RMD without adding to your taxable income.
- Roth conversions before RMD age: Converting traditional dollars to Roth in your 60s shrinks the balance later subject to RMDs.
- Reinvest what you do not need: An RMD must leave the retirement account, but nothing stops you from moving it into a taxable brokerage account to keep it working.
The IRS publishes detailed guidance in its RMD FAQs, which is worth a read before your first withdrawal year.
What About Inherited Retirement Accounts?
RMD rules get more complicated when you inherit a retirement account, and the penalties are just as steep. Most non-spouse beneficiaries who inherited an IRA after 2019 now fall under the 10-year rule, meaning the entire account must be emptied within ten years of the original owner’s death.
Under final IRS regulations, many of these beneficiaries must also take annual RMDs in years one through nine if the original owner had already reached their required beginning date. Spouses generally have more flexible options, including treating the account as their own. Because the rules differ sharply depending on your relationship to the original owner and when they died, inheriting a retirement account is one situation where a quick check with a tax professional almost always pays for itself.
Where People Most Often Slip Up
The most common RMD mistakes are surprisingly easy to avoid. People forget the deadline in their very first year because the April 1 grace period lulls them into delay, then they get hit with two taxable withdrawals at once. Others overlook an old 401(k) from a former employer, since 401(k) RMDs cannot be aggregated the way IRA RMDs can.
Some assume their custodian will automatically send the money, but the legal responsibility to take the distribution rests with them. And a few forget that Roth IRAs never required lifetime distributions in the first place, leading them to withdraw money they could have left growing tax-free. A simple annual checklist, or an automated distribution set up with each custodian, eliminates nearly all of these errors before they can cost you a penalty.
Why Planning Ahead Matters So Much
The biggest RMD mistakes happen because people treat them as a surprise rather than a known event with a decade of warning. Large traditional balances can generate sizable forced withdrawals that push you into a higher tax bracket, increase the taxation of your Social Security benefits, and even raise your Medicare premiums through IRMAA surcharges.
By the time the RMD arrives, your options are limited. That is why the years before RMD age are so valuable. Drawing down traditional accounts or doing Roth conversions during your lower-income early retirement years can dramatically reduce future RMDs and the taxes they trigger. A little planning in your 60s often saves far more than scrambling at 73.
The Bottom Line
Required minimum distributions are unavoidable, but the tax pain around them is largely manageable with foresight. Know your starting age, mark the December 31 deadline, automate the withdrawal to dodge the 25% penalty, and use tools like QCDs and earlier Roth conversions to keep more of your money. Retirees who handle RMDs well are the ones who started planning years before the first withdrawal was due. For more, explore our retirement planning guide.
Image Credit: Pexels
