Quick Answer

Required minimum distributions are minimum annual withdrawals that many retirement account owners must take from traditional IRAs and certain retirement plans. Under current IRS guidance, many owners generally start at age 73, while some younger cohorts may start later under SECURE 2.0 rules.

How RMDs Are Estimated

The basic calculation is:

Prior year-end account balance divided by the IRS life expectancy factor.

For many original account owners, the IRS Uniform Lifetime Table is used. At age 73, the factor is 26.5. That means a $795,000 prior year-end balance would produce an estimated RMD of $30,000.

Why RMDs Create Tax Cliffs

RMDs are usually taxable as ordinary income when taken from pre-tax accounts. That income can stack on top of Social Security, pensions, interest, dividends, and other withdrawals. As a result, RMDs can push a household into higher federal brackets, make more Social Security taxable, or raise IRMAA MAGI.

The forced nature of RMDs is the important part. Before RMD age, you can often choose whether to withdraw or convert. After RMDs begin, a portion of the withdrawal schedule is no longer optional.

Example: Growing Balance Before RMDs

Assume a retiree is age 68 with a $900,000 traditional IRA and does not need withdrawals yet. If the account grows for several years, the age 73 RMD could be much higher than today's balance suggests. A future RMD near $40,000 could arrive in the same year as Social Security, pension income, and investment income.

That future pressure is one reason some households use partial Roth conversions before RMD age. The conversion creates tax now, but it may reduce the pre-tax balance that later RMDs are based on.

First-Year Timing

Some account owners can delay the first RMD until April 1 of the year after the year they reach the required beginning age. That can be useful in some cases, but it may cause two RMDs to land in the same calendar year. Two RMDs in one year can increase taxable income and potentially affect IRMAA.

Planning Checklist

  • Estimate your first RMD several years before it begins.
  • Compare no-conversion and partial-conversion scenarios.
  • Watch the surviving-spouse filing status change.
  • Coordinate RMDs with Social Security claiming and Medicare premiums.
  • Ask a tax professional about QCDs if charitable giving is part of your plan.

Next step: Use the RMD projection inside the calculator to see how future withdrawals may affect income.

Project RMDs

Sources