RMD (Required Minimum Distribution)
The minimum amount that must be withdrawn each year from tax-deferred accounts, starting at 73.
Tax deferral is not indefinite. From age 73, holders of traditional 401(k)s and IRAs must withdraw a minimum each year, calculated by dividing the prior year-end balance by a life expectancy factor from the IRS Uniform Lifetime Table. SECURE 2.0 moved the starting age from 72 to 73, and it rises to 75 in 2033.
The required percentage climbs with age, from roughly 3.8% at 73 to about 5.3% at 80 and higher thereafter. Because the amount is a function of the balance, a large tax-deferred account can push required income into a higher bracket than the holder would otherwise occupy, and can affect Medicare premium surcharges through IRMAA.
Roth IRAs carry no RMD for the original owner, which is the structural difference that makes the timing of conversions consequential. SECURE 2.0 also cut the penalty for a missed distribution from 50% to 25%, and to 10% if corrected within a defined window.
Worked through
First required distribution at 73
An $800k traditional IRA balance at the end of the prior year, divided by the age-73 factor.
- Prior year-end balance
- $800,000
- Required at 3.8%
- $30,400
- Income tax at 22%
- $6,688
- Penalty if missed
- $7,600
The penalty is 25% of the shortfall, falling to 10% if corrected promptly. It applies whether or not the money was needed.
See your own rmd (required minimum distribution)
Promi computes this from your linked accounts, with the definition one click from the number.
Try the demo