Tax-deferred growth is the whole appeal of a traditional IRA or 401(k) — until the IRS decides it’s time to collect. Required minimum distribution planning isn’t just about knowing when your first RMD is due; it’s about deciding, years in advance, how to shrink that eventual tax bill and avoid the mistakes that turn a routine withdrawal into a penalty.
When RMDs Begin
Your first RMD is due the year you reach your Applicable Age — 73 if you were born between 1951 and 1959, or 75 if you were born in 1960 or later. (This age moved from 72 following the SECURE Act 2.0 in December 2022, and was 70 1/2 before 2020, so older calculators and articles may still show the wrong number.)
You have until April 1 of the year after you reach your Applicable Age to take that first distribution — the “Required Beginning Date.” Every year after that, the deadline is December 31. Miss it, and the IRS can apply a penalty of up to 25% on the amount you should have withdrawn.
One planning note: if you wait until the April 1 deadline for your first RMD, you’ll end up taking two distributions in that second calendar year — which can push you into a higher bracket, raise your Medicare Part B premium, or increase your capital gains rate that year. Usually, it’s more tax-efficient to just take the first RMD in the year you reach your Applicable Age.
How Much You Have to Withdraw
Each year’s RMD is your prior December 31 account balance divided by an IRS life-expectancy divisor for your age. As you get older, the divisor shrinks and the required percentage grows.
Example. Rick’s Applicable Age is 73. His combined IRA balance on December 31 of last year was $850,000, and the divisor for his age is 26.5. His RMD is $850,000 ÷ 26.5 = $32,075, and he owes tax on that amount (assuming the entire IRA was pre-tax dollars). Twenty years later, at 93, that same math uses a much smaller divisor — meaning a larger share of his remaining balance comes out each year.
You can always withdraw more than the required amount. You just can’t withdraw less.
RMD Mistakes to Avoid
- Missing the December 31 deadline (or the April 1 deadline for your first RMD) and triggering the excise tax penalty.
- Bunching two RMDs into one tax year by delaying the first one to the following April, without checking whether that actually saves money.
- Assuming all your accounts aggregate the same way. Traditional IRAs (including SEP and SIMPLE IRAs) can be combined and withdrawn from any one of them. 403(b)s can also be aggregated with each other. But 401(k) and 457(b) plans cannot — each one requires its own separate distribution.
- Trying to roll an RMD into a Roth IRA. You can’t convert a required distribution — you can only take it, pay the tax, and convert additional amounts beyond it.
- Missing the still-working exception. If you’re still employed past your Applicable Age and own 5% or less of the company, you can typically delay RMDs from that employer’s 401(k) — but not from IRAs or former employers’ plans.
- Not knowing about Qualified Charitable Distributions. If you’re charitably inclined, directing up to $111,000 (2026 limit, indexed annually) of your RMD straight to a qualified charity keeps that amount out of your adjusted gross income entirely — which can also help avoid IRMAA surcharges or the net investment income tax. Even better, QCDs can begin at 70 1/2, many years before RMDs. For those charitably inclined who need to whittle down their pre-tax IRA balance, this is a great option.
- Forgetting to track basis for any non-deductible IRA contributions. Non-deductible contributions create basis that should be reported on Form 8606 and carried forward every year. When that tracking gets lost — often in a switch of tax preparers — you pay tax on those dollars a second time upon withdrawal.
How to Reduce Your RMD
Since the RMD formula is just a balance divided by a life-expectancy factor, there are really only two levers: reduce the pre-tax balance, or change what kind of account holds it.
- Roth conversions before your Applicable Age. Converting a portion of a traditional IRA to a Roth in years before RMDs begin — especially in lower-income years — permanently shrinks the balance the RMD formula is calculated against. (We cover how to figure out how much and when in our Roth conversion timing article.)
- Qualified Longevity Annuity Contracts (QLACs). You can move up to $210,000 (2026 lifetime limit, indexed) of your combined IRA and employer-plan balances into a QLAC, which defers RMDs on that portion until as late as age 85. This lowers your RMD in the years before then — but plan carefully, since it can increase your RMD later once the QLAC starts paying out.
- Qualified Charitable Distributions, as above — post RMD this is usually a more tax efficient way to donate than gifting after-tax funds.
- In-kind distributions. If you don’t need the cash, you can transfer shares directly out of the IRA to a taxable brokerage account instead of selling first. You still owe tax on the distribution amount, but the investment stays invested rather than moving to cash.
Getting Ahead of RMDs With a Planning Advisor
The common thread in real required minimum distribution planning is that it has to happen years before your first RMD — Roth conversions, QLAC decisions, and account consolidation all need lead time to pay off. Waiting until the year your Applicable Age arrives means most of your options are already off the table.
At Sensible Money, RMD planning is built into every retirement income plan, not treated as a separate task — because the Roth conversion decisions, tax-bracket management, and account structure we recommend in your 50s and early 60s are the same decisions that determine how large (or small) your RMDs turn out to be. If you’re trying to figure out how to reduce your RMD before it starts, the earlier we look at it together, the more options you’ll have.
