Required Minimum Distributions: 7 Things You Should Know

Patrick Horning is a senior director of Advanced Planning at Northwestern Mutual.

RMDs, or required minimum distributions, sound complicated but are important to understand by the time you reach your 70s. That’s because once you hit 73, Congress requires you to begin taking RMDs from your traditional (i.e., non-Roth) 401(k), IRA or other tax-deferred, qualified retirement plan.

Essentially an RMD is the smallest amount of money that you are legally mandated to withdraw each year from most employer-sponsored retirement plans and IRAs. Miss the annual RMD deadline and you could face a stiff penalty of up to 25 percent of the amount you should have withdrawn—plus ordinary income tax.

If you’re going to be affected by RMDs in the next few years, it’s a good idea to learn the rules so you can avoid common pitfalls. Here are seven important things you should know about RMDs.

1. Be aware of your RMD deadlines

RMDs must be taken no later than December 31 of the appropriate year. However, Congress gives you a little leeway for the timing of your first distribution. You actually have until April 1 of the calendar year following the one in which you turn the appropriate age to take your first distribution.

For most people, the current required beginning date for RMDs is age 73. On January 1, 2033, this age will rise to 75. So, if you turn 73 in 2026, you have until April 1, 2027, to take your first distribution. Each subsequent distribution needs to be withdrawn by December 31 of that year.

2. Just because you can delay your first RMD doesn’t mean that you should

Before delaying your first RMD, you’ll want to check its impact on your taxes. Delaying the distribution until April 1 following the year in which you reach the appropriate age means that you’ll need to take your first and second distributions in the same calendar year. This could bump you into a higher tax bracket; it could also make you subject to the Medicare high-income surcharge, also known as income-related monthly adjustment amount (IRMAA). This applies if your 2024 income exceeds $109,000 if you are single or $218,000 if you are married and file jointly. (The surcharge is based on your filing status and income two years before the current year.) The extra income also may mean that a larger portion of your Social Security benefits will be subject to taxes.

If you need help determining whether delaying would be beneficial to your situation, your financial advisor can help you develop your strategy.

3. Calculating your RMD is easier than you might think

To calculate your RMD, divide your retirement account balance(s) as of December 31 of the prior year by a life expectancy factor (based partially on your age) that is set by the IRS. Each year, the IRS publishes worksheets and uniform tax tables to guide you through the calculation.

Example RMD calculation

Here’s an example. (Get a calculator ready.) A married IRA owner who turned 75 this year (and whose sole IRA beneficiary is a spouse who is not more than 10 years younger) has an end-of-year balance of $250,000. To calculate that year’s RMD, the owner would divide that balance by a life expectancy factor of 24.6 (for example) for an RMD of $10,162.60.

How to take RMDs from multiple retirement accounts

If you have multiple IRAs (traditional, rollover, Simplified Employee Pension, and SIMPLE IRAs), you will need to calculate the RMD for each account separately. You can then aggregate the amounts and withdraw your RMDs from any one (or more) of your IRAs—just make sure that you meet the total. Designated Roth Accounts and Roth IRAs do not have RMDs and are not included in the calculation.

Your qualified plan administrator is responsible for calculating the RMD from your 401(k), 403(b), SIMPLE 401(k), and section 457(b) plan. Many retirees have worked for different employers and might have several 401(k) accounts. Unlike IRAs, qualified plan accounts are not aggregated, so each plan administrator will calculate and send the distribution amount.

As you calculate your RMD, you’ll want to keep in mind that your distributions will impact your income, which could push you into a different federal or state income tax bracket. For example, if you are single and your income hovers around $100,000, a sizable distribution could force you into the 24 percent federal tax bracket.

4. Do you have to take an RMD if you’re still working?

The answer to this question depends on what type of retirement account you have. For a traditional IRA, you’re required to take RMDs once you reach the appropriate age whether you are working or not. (A Roth IRA has no RMD.)

If you participate in an employer-sponsored plan, you may be able to postpone taking RMDs from the plan sponsored by your current employer until you retire—unless you own more than 5 percent of the company you work for. You also might be able to avoid RMDs on IRAs or other 401(k) plans by rolling those assets into your current employer-sponsored plan, if possible.

5. There are different ways to meet RMD requirements

RMDs don’t necessarily need to be in the form of cash withdrawals from your retirement account. There are other transactions that would satisfy your RMD requirement and could offer additional tax benefits in the long run.

Make an in-kind transfer

If your living expenses are covered and you don’t need the money, remember that you don’t have to take the distribution in cash. You can move it into a brokerage account as an “in-kind transfer” and still meet IRS RMD requirements. Of course, this portion of your retirement savings is then subject to the ups and downs of the financial market. This does not avoid or mitigate income tax on the distribution.

Take a qualified charitable distribution

Feeling philanthropic? Another option is the qualified charitable distribution (QCD) rule. In 2026, it allows you to transfer up to $111,000 from a traditional IRA directly to a public charity. A QCD is a required minimum distribution. A QCD is excluded from income taxation and cannot be deducted as a charitable contribution.

Purchase a Qualified Longevity Annuity Contract (QLAC)

Yet another option is to purchase a Qualified Longevity Annuity Contract (QLAC), which is an insurance contract that provides a guaranteed income for life. A QLAC is a type of deferred income annuity, meaning you choose to defer the income you’ll receive until a future date. In 2026, you’re able to put up to $210,000 into a QLAC and defer income up to age 85, so a QLAC can be a creative way to delay RMDs on a segment of your retirement funds.

6. Failure to make RMDs will result in penalties

If you don’t take your distributions on time or calculate the amount incorrectly, you’ll owe a 25 percent penalty on any RMD amounts you should have taken in addition to the ordinary income tax you’ll owe for the distribution. This may be reduced to 10 percent if you correct it within two years via IRS form 5329.

For example, if your RMD is $10,000 from an IRA and you took only $5,000, you’ll pay up to $1,250 (25 percent of the RMD not taken) in tax penalties plus your ordinary income tax ranging from 10 to 37 percent. This penalty might be lowered to 10 percent if you correct the violation in a timely manner.

7. Your financial advisor can help

The best way to be prepared for RMDs is to have a solid retirement plan. Knowing what to expect in the future and creating a diversified retirement plan can help you minimize your tax impact and make the most of your hard-earned savings. Whether you’re just starting to save or approaching retirement, your Northwestern Mutual financial advisor can get to know what's important to you and help you build strategies to grow and protect your money.

This publication is not intended as legal or tax advice. Financial representatives do not render tax advice. Consult with a tax professional for tax advice that is specific to your situation.

Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP^®, CERTIFIED FINANCIAL PLANNER^®, and CFP^® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.

Frequently Asked Questions

What is the biggest RMD mistake?

Two of the biggest RMD mistakes are missing the deadline and withdrawing less than the required amount. If you fail to take your full RMD by the applicable deadline, the IRS can assess a penalty of up to 25 percent of the amount that should have been withdrawn, in addition to any income taxes owed on the distribution. Another common mistake is delaying your first RMD without considering the tax consequences, which results in taking two distributions in the same year, potentially increasing your taxable income.

How much do I have to withdraw from my IRA at age 73?

The amount you must withdraw depends on your IRA balance and your IRS life expectancy factor. In general, you calculate your RMD by dividing your IRA's value as of December 31 of the previous year by your current-year life expectancy factor as provided in the IRS Uniform Lifetime Table. For someone age 73, the factor is 26.5. For example, if your IRA balance was $265,000 at the end of the prior year, your RMD would be $10,000. Because every retiree's account balance is different, your required withdrawal amount will be unique to your situation.

What is the best month to take an RMD?

There isn't a single "best" month to take an RMD—it depends on your financial and tax situation. Some retirees prefer taking their RMD early in the year so they don't risk forgetting the deadline, while others spread withdrawals throughout the year to help manage cash flow. If you're taking your first RMD, it's important to evaluate whether delaying it into the following year could increase your tax bill because you are now taking two years of RMDs in a single year. A financial advisor or tax professional can help determine the timing strategy that works best for