What it is and when it starts
A required minimum distribution, the formal name for the minimum IRA distribution, is the amount the IRS makes you withdraw from pre-tax retirement accounts each year, generally starting at age 73.
Key takeaways
The formula
The formula is simple: prior December 31 balance divided by an IRS life expectancy factor. At 73, that is roughly 3.8 percent of the account.
The penalty (and the exclusion)
Miss one and the excise tax is 25 percent of the shortfall, cut to 10 percent if corrected quickly. New York excludes up to $20,000 of this income from state tax for those 59½ and older.
RMD questions pay off most when asked the year before the first one is due.
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The setup
Money went in untaxed. Some has to come out — and be taxed.
The minimum IRA distribution, officially the required minimum distribution or RMD, is the amount you must withdraw from a pre-tax retirement account each year once you reach 73. Money went into your traditional IRA or 401(k) untaxed. Starting in the year you turn 73, some of it must come out and be taxed each year, whether you need the money or not.
The rules are mechanical. The deadlines and the account by account detail are where people come unstuck, and the penalty for missing one is steep. The start age is 73 today, and it moves to 75 for people born in 1960 or later.
01Calculation
How the required minimum distribution is calculated
Take each account’s balance on December 31 of last year and divide it by the life expectancy factor for your age from the IRS Uniform Lifetime Table. At 73 the factor is 26.5, so a $500,000 IRA requires a withdrawal of about $18,900. The factor shrinks every year, so the required percentage rises as you age. Married owners whose sole beneficiary is a spouse more than ten years younger use a different table with smaller required amounts.
How the amount is worked out, account by account
The formula
Account balance on 31 December last year
÷
Life expectancy factor for your ageIRS Uniform Lifetime Table
= this year’s required minimum distribution
Worked example, age 73
$500,000
Balance on 31 December
÷
26.5
Factor at age 73
≈ $18,900
The factor shrinks every year, so the required percentage rises as you age. Owners whose sole beneficiary is a spouse more than ten years younger use a different table with smaller required amounts.
02Deadlines
Deadlines: December 31 each year, and the April 1 first-year option
Every RMD after the first is due by December 31. The first one alone may be delayed to April 1 of the following year, and deferring means two taxable distributions fall in the same calendar year. Two RMDs stacked can push you into a higher bracket, raise how much of your Social Security is taxed, and trip the Medicare premium surcharges two years later. Deferral is sometimes the better choice, but only where both versions have been calculated first.
Only the first distribution can be delayed
Say you turn 73 this year. The first RMD is the only one with a choice attached, and the choice decides how many taxable distributions land in the following year.
The year you turn 73
Take it by 31 December
RMD 1
Taken by 31 December.
Defer to 1 April
Nothing taken.
The next year
Take it by 31 December
RMD 2
Taken by 31 December. One distribution in each year.
Defer to 1 April
RMD 1 by 1 April, then RMD 2 by 31 December
Two taxable distributions in the same calendar year.
Two RMDs stacked into one year can push you into a higher bracket, raise how much of your Social Security is taxed, and trip the Medicare premium surcharges two years later.
Deferral is sometimes the better choice, but only where both versions have been calculated first.
03Which accounts
Which accounts have RMDs, and which do not
Traditional, SEP, and SIMPLE IRAs, plus 401(k), 403(b), and similar workplace plans: all require distributions.
Roth IRAs have no distributions during the owner's lifetime, and designated Roth 401(k) accounts joined that exemption starting in 2024.
IRAs aggregate: total the RMDs across your IRAs, then take the sum from any one of them. Workplace plans do not aggregate; each 401(k) pays its own.
Still working at 73? The plan at your current employer can generally wait until you retire. Your IRAs cannot.
Inherited accounts run on separate rules, with most non-spouse heirs required to empty the account within ten years.
Aggregation is where this goes wrong most often. A retiree who over-withdraws from an IRA while a forgotten 401(k) is left untouched has still missed an RMD on the 401(k), and the surplus taken from the IRA does not count against it.
04Fix a missed RMD
How to fix a missed RMD: Form 5329 and the penalty waiver
The excise tax on a missed distribution is 25 percent of the amount not taken, reduced to 10 percent when the shortfall is corrected within the two year window. Beyond that, the IRS can waive the penalty entirely for reasonable cause. The fix runs in three steps.
25%
Excise tax on the amount not taken
10%
If corrected within the two-year window
Waived
IRS can remove it entirely for reasonable cause
Three steps to correct a missed RMD
Withdraw the shortfall now
Take it as a separate distribution from the account that missed it, before anything is filed.File Form 5329 for the year you missed
Not for the year you are correcting it in. This is the most common error on these requests.Attach a letter requesting the waiver
Explain what happened and show that the shortfall has already been taken. The request rests on correcting it before asking.
We prepare these requests regularly. They rest on correcting the shortfall before asking, and on explaining plainly how the miss happened.
05New York exclusion
New York's $20,000 pension and IRA exclusion
New York gives residents 59½ and older an exclusion of up to $20,000 per person of pension, annuity, and IRA income from state tax, and government pensions from New York or federal service are excluded in full. The $20,000 is an aggregate cap across accounts, applies per spouse on a joint return, and it makes the state cost of a distribution plan very different from the federal cost. A qualified charitable distribution is one more option: sent directly from an IRA to a charity, it counts toward the RMD without entering your income at all.
$20,000
NY pension/IRA exclusion per person, 59½+
Full
Government pensions excluded in full
QCD
Sent to charity, out of your income
07Planning
Distribution planning with a CPA
An RMD is a floor, not a plan.
The work around it is deciding which accounts to draw from and in what order, setting withholding so the tax is paid as you go rather than in April, using the years before 73 for Roth conversions while the bracket allows it, and sequencing withdrawals against the New York exclusion so the state cost is not an afterthought.
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On planning ahead
“Anytime you have a major change in your situation, whether it's your family situation, whether it's your work, whether it's income or source of income, you want to speak with the tax adviser and make sure that everything that you're doing now continues to make sense in the future.”
George Dimov, CPA
“I've been working with George Dimov for several years now. Whether it's tax season, financial planning, or just answering questions throughout the year, they always take the time to make sure everything is done right. I truly appreciate their professionalism, attention to detail, and the peace of mind they provide. If you're looking for an accountant you can trust long-term, this is the one!”
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What we fix most often
The withholding trap
The problem we fix most often is withholding set to zero on IRA distributions all year, leaving the whole tax bill to arrive in April. A distribution plan sets the withholding, times the withdrawals against brackets, and folds the state exclusion in, all inside the same individual tax relationship that files the return.
Book a retirement tax consultation
Book a retirement tax consultation
Turning 73 this year or next, or inheriting an account? Say so when you reach out and we will start with the deadline map.
Reviewed by George Dimov, CPA, New York, NY. Serving clients in all 50 states, 15+ years advising on retirement distribution planning. President of George Dimov, CPA, a New York City firm serving clients across the five boroughs and nationwide.