Kevin Dick
Posted on Nov. 12, 2026
What Is an RMD?
A Required Minimum Distribution (RMD) is the minimum amount the IRS requires you to withdraw each year from certain retirement accounts once you reach a specified age. Currently, RMDs begin at age 73. If you were born in 1960 or later, they begin at age 75 (starting in 2033).
To make sense of RMDs, it helps to understand why they exist in the first place. Why would the IRS care whether your funds stay invested or get withdrawn? After all, it’s your money, right? Well, as it turns out, the government has decided that some of it is actually their money… in the form of taxes.
Many retirement accounts are funded with pre-tax dollars, meaning you haven’t paid income taxes on the money yet. Usually this happens through a payroll deduction into an employer plan like a 401(k), or in the form of a tax deduction on an IRA contribution. The government allows for these tax deferrals as a way to encourage people to build their retirement savings, and in many ways it’s a win-win. You get compounding growth on money that hasn’t been taxed yet, while the government cashes in later once you start withdrawing in retirement and paying taxes on a larger sum.
At a certain point, though, the government decides that you’ve enjoyed tax-free growth long enough and it wants its cut. To that end, tax revenue is manufactured by forcing withdrawals through RMDs. However, not every retirement account is subject to RMDs, and, as we’ll see later, there are strategies to reduce the tax on accounts that are.
Which Accounts are Subject to RMDs?
RMDs apply only to certain tax-deferred retirement accounts. Conversely, after-tax accounts such as regular brokerages, Roth IRAs, and Roth 401(k)s, have no RMDs. The logic is simple: you’ve already paid income tax on the money going in, so the government has no reason to force withdrawals. Pre-tax contributions are a different story because they haven’t been taxed yet.
Inherited accounts follow their own set of rules. Non-spouse beneficiaries who inherit a traditional IRA typically fall under the 10-Year Rule [1], where the inherited account must be emptied by the end of the tenth year after the original owner’s death. If the original owner was already taking RMDs when they passed, then the beneficiary is also required to take annual RMDs. All withdrawals from inherited traditional IRAs are taxed as ordinary income. Inherited Roth IRAs must also be emptied within ten years, but in most cases no annual RMDs are required and withdrawals are completely tax-free.
Generally subject to RMDs:
- 401(k)s, 403(b)s, and 457(b)s
- Traditional, SEP, and SIMPLE IRAs
- Annuities held inside an IRA or retirement plan
- Inherited traditional IRAs (exception for spouses)
Generally not subject to RMDs:
- Regular brokerage accounts (individual, joint, etc.)
- Roth 401(k)s, Roth 403(b)s, and Roth 457(b)s
- Roth IRAs
Some employer-sponsored retirement plans let you delay taking RMDs until you retire, even after you’ve reached RMD age, as long as you’re still working for that same employer. However, this “still working” exception does not apply to IRAs (including SEP and SIMPLE plans), other plans held with former employers, or anyone who owns 5% or more of the company sponsoring the plan
[1] For a more in-depth look at inherited IRAs and the 10-Year Rule, check out this article.
Calculating Your RMDs
Once you know that you need to take an RMD, the next step is figuring out how much you’re required to withdraw. The formula depends on whether you’re the original account owner or a beneficiary of an inherited account, and the amount can change quite a bit from year to year. Each calculation follows the same basic principles, though. [2]
For original holders of a traditional IRA, it’s a three-step process:
- Find the account balance as of December 31st of the previous year.
- Look up the distribution factor for your age you’ll turn this year.
- Divide the account balance by the distribution factor to get your RMD.
For non-spouse beneficiaries of an inherited IRA, there’s an extra step:
- Find the account balance as of December 31st of the previous year.
- Look up your life expectancy factor using the age you turned in the year after the original owner’s death.
- Subtract one from that factor for each year that has passed since then.
- Divide the account balance by the adjusted factor to get your RMD.
Of course, these are general guidelines, and some situations come with exceptions. So, it’s important to speak with an advisor before calculating an RMD. If you miss an RMD or withdraw too little, the IRS can charge a penalty of 25% on the amount you should have taken. It’s a costly mistake that’s easy to avoid with the right team in place.
[2] Check out our resources page for quick links to calculators that will help you calculate your RMD.
Combining Your RMD Obligations
You always have to calculate each account’s RMD separately. In some cases, though, you can add those amounts together and withdraw the total from a single account.
For example, if you have more than one pre-tax IRA, whether traditional, SEP, or SIMPLE, you can take your combined RMD from just one of them. Multiple 403(b)s work the same way, although it’s important to remember that IRAs and 403(b)s can’t be combined with each other. Other employer plans, like 401(k)s and 457(b)s, don’t allow aggregation at all, meaning each plan’s RMD must be calculated and withdrawn by itself.
Once again, inherited accounts play by their own rules. RMDs from accounts inherited from different people can never be combined. In other words, if you inherit one IRA from your uncle and another from your aunt, each RMD must be calculated and taken separately. Inherited accounts also can’t be combined with your own retirement accounts. From there, the usual rules apply. Inherited pre-tax IRAs, Roth IRAs, and 403(b)s from the same person can each be aggregated with others of the same type, while RMDs for other inherited employer plans must be kept separate.
Strategies to Reduce Your Tax Bill
While RMDs are more or less inevitable with pre-tax retirement savings, there are several ways to reduce the tax bill that comes with them.
- Roth conversions – As we discussed earlier, Roth accounts are not subject to RMDs. A Roth conversion is a strategy where you move funds from a pre-tax retirement account into an after-tax Roth account. In doing so, you’re voluntarily paying taxes on the money now in exchange for tax-free growth and tax-free withdrawals later. Conversions often work best in lower-income years, like the gap between retirement and RMD age. Spreading them over several years can also keep you out of a higher tax bracket.
- Withdrawals before RMD age – You can take penalty-free withdrawals from pre-tax retirement account once you reach age 59 ½. Again, drawing down some of your balance in lower-income years shrinks the account that future RMDs are based on, so you aren’t hit with larger distributions at higher tax rates later.
- Qualified Charitable Distributions (QCDs) – Starting at age 70 ½, you can give directly from your IRA to a qualified charity, up to an annual limit. QCDs count toward your RMD but aren’t included in your taxable income, so they can be a tax-efficient way to give, even if you don’t itemize deductions.
- Net Unrealized Appreciation (NUA) – If your 401(k) holds company stock that has grown significantly in value, NUA allows you to move those shares into a regular brokerage account. Once the shares are out of your 401(k), they’re effectively removed from RMD consideration. You pay income tax only on the original cost of the shares (your cost basis), not their full value, and the growth is taxed at much lower long-term capital gains rates when you eventually sell.
The Bottom Line
RMDs are a normal part of retirement for anyone with pre-tax savings, but they don’t have to catch you off guard. Knowing which accounts require them, how they’re calculated, and how inherited accounts work can help you avoid costly mistakes. With some planning ahead of time, you may be able to lower the taxes that come with them. Everyone’s situation is different, so if you have questions about your own RMDs, or how to prepare for them, our team is here to help.
This content is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. Investing involves the risk of loss, including the possible loss of principal. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.