Required minimum distributions, or RMDs, are the withdrawals the IRS forces you to take from tax-deferred retirement accounts once you hit a certain age.
For 2025, the age is 73 for most people, rising to 75 in 2033 under current law.
The rule applies to traditional IRAs, 401(k)s, and most workplace plans.
Roth IRAs are exempt during the owner's lifetime, which is one reason they've become a favorite tool for people planning ahead for taxes.
Here's where it gets tricky: you can't just take the money and stuff it back into the same account.
The withdrawal is taxable as ordinary income for the year you take it.
That can push you into a higher bracket, raise your Medicare premiums, and even affect how much of your Social Security gets taxed.
The IRS divides your account balance by a life expectancy factor from its Uniform Lifetime Table.
At 73, that factor is about 26.5, so a $500,000 balance means roughly $18,900 must come out that year.
You must take your first RMD by April 1 of the year after you turn 73.
But if you delay it to that spring, you'll owe two distributions in the same tax year, since the second one is still due by December 31.
That double hit surprises a lot of new retirees.
For 401(k)s and similar plans, the rules get more personal.
If you're still working and don't own more than 5% of the business, you may be able to skip RMDs from that plan until you retire.
The penalty for not taking the required amount is 25% of the shortfall, though it can drop to 10% if you fix it quickly and file the right paperwork.
That's on top of the income tax you still owe on the money.
There's also the question of what to do with the cash once it lands.
Some retirees use it for bills, some reinvest it in a taxable brokerage account, and others convert it to a Roth to limit future taxes.
One common mistake: taking an RMD from the wrong account.
Each IRA has its own calculation, but you can usually satisfy the total across multiple IRAs by withdrawing from just one.
That flexibility doesn't extend to 401(k)s, which must be handled plan by plan.
If you inherited an IRA in recent years, different rules may apply.
Many non-spouse beneficiaries now face a 10-year payout window, with annual withdrawals required in some cases.
The details depend on your relationship to the original owner and when they died.
RMDs aren't a punishment, but they are a planning deadline.
Knowing your number early can keep a surprise tax bill from eating into your grocery budget, your rent, or the interest you were counting on from savings. **Our take:** RMDs are one of the most predictable parts of retirement, yet they catch people off guard every single year.
Final Thoughts
A quick call to your plan administrator or a look at the IRS tables could save you hundreds in penalties and a headache at tax time.