Finance Maxxing
Retirement Accounts
Required Minimum Distributions (RMDs)
Mandatory annual withdrawals from pre-tax retirement accounts.
Starting at age 73 (under SECURE 2.0 Act), you must take minimum distributions from pre-tax retirement accounts.
RMD Ages
| Birth Year | RMD Begins At |
|---|---|
| Before 1951 | 72 (already started) |
| 1951–1959 | 73 |
| 1960 or later | 75 |
How RMDs Are Calculated
RMD = Account Balance (Dec 31 prior year) ÷ Life Expectancy Factor
Example: $1,000,000 balance, age 73 (factor = 26.5):
$1,000,000 ÷ 26.5 = $37,736 minimum distribution
Key Rules
| Rule | Details |
|---|---|
| Penalty for missing RMD | 25% of amount not withdrawn (10% if corrected promptly) |
| Roth IRA | Exempt from RMDs during owner's lifetime |
| Inherited Roth IRA | Subject to 10-year distribution rule |
| Multiple accounts | Can aggregate IRA RMDs from any IRA |
| 401(k) accounts | Each 401(k) must distribute separately |
| Still working exception | Can delay 401(k) RMD if still employed (not for 5%+ owners) |
Strategy: Reduce Future RMDs
- Roth conversions before age 73 (pay tax now at lower rate)
- Qualified Charitable Distributions (QCDs) — donate up to $105,000/year directly from IRA (counts toward RMD, excluded from income)
Sources
More in Retirement Accounts
401(k) / 403(b) / 457(b)
Employer-sponsored retirement plans with tax-deferred growth.
Traditional IRA
Tax-deductible contributions with tax-deferred growth.
Roth IRA
After-tax contributions with tax-free growth and withdrawals.
Health Savings Account (HSA)
Triple tax-advantaged: deductible, tax-free growth, tax-free withdrawals.
Traditional vs. Roth
Pre-tax now vs. tax-free later — depends on future tax rate.
Roth Conversion
Moving pre-tax retirement assets into a Roth account.
529 College Savings Plan
Tax-free growth for education expenses; state deductions may apply.