Understanding Required Minimum Distributions from Retirement Accounts by Rachel Kenney Rego, CPA

Posted on March 21, 2023 by Rachel Kenney Rego

You have a broad range of opportunities to save money during your working years so that you may afford a comfortable retirement in the future. Yet, with each type of retirement savings plan comes a unique set of rules and requirements, including procedures for paying taxes on your plan contributions and earnings. In the most basic terms, you either pay taxes when you contribute to your plan or when you take IRS-required withdrawals in retirement.

What is an RMD?

A required minimum distribution (RMD) is the lowest amount of money you must annually withdraw from specific types of retirement accounts and pay income tax on once you reach a certain age. These tax-deferred accounts include traditional individual retirement accounts (IRAs), simplified employee pension (SEP) IRAs, savings incentive match plans for employees (SIMPLE) IRAs and workplace 401(k)s, Roth 401(k)s, 403(b)s and 457(b)s retirement plans. By contrast, you pay taxes on contributions to a Roth IRA in exchange for tax-free withdrawals in retirement.

When Must I Take RMDs?

Under prior law, you generally must begin taking RMDs by April 1 of the year after you turn age 72 (or 70 ½ if you turned 70 ½ before January 1, 2020). This changes in 2023 under the Secure Act 2.0, which increases the RMD age to 73 for individuals who turn 72 after Dec. 31, 2022. In 2033, the age at which individuals must begin taking RMDs increases again to age 75.

If your plan is not an IRA and you are not a 5 percent owner in the business sponsoring the plan, you can delay your first RMD until the date you actually stop working, provided it occurs after the year you reach your RMD age.

If the owner of an IRA or defined contribution plan dies before taking his or her first RMD, eligible beneficiaries that include surviving spouses, minor children and dependents with disabilities may treat those accounts as their own and delay RMDs. All other beneficiaries must withdraw the entire balance of those inherited accounts within 10 years.

How Do I Calculate an RMD?

The amount of your RMD changes each year based on the account balance in your retirement account as of December 31 of the previous year and your life expectancy, which the IRS updates and publishes each year. Generally, you must separately calculate your RMDs for each qualifying retirement account you own. While you must take separate RMDs for each of your 401(k) and 457(b) plans, you may take the total amount of your IRA RMDs from one or more accounts.

What Happens if I Miss A Required Minimum Distribution?

Under Secure Act 2.0, an account owner who fails to take an RMD or who takes less than required by December 31 will be subject to a 25 percent excise tax on the undistributed amount, half the penalty applied in prior years. For owners of IRAs, the excise tax can be reduced to 10 percent of the undistributed amount when they take steps to correct their mistakes in a timely manner.

About the Author: Rachel Kenney Rego, CPA, is a senior manager of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where she works with entrepreneurs and high-net-worth families to develop and implement strategies for business, individual and estate tax efficiency. She can be reached at the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or