Required Minimum Distribution (RMD)
The minimum amount you must withdraw annually from tax-deferred retirement accounts like Traditional IRAs and 401(k)s starting at age 73. Roth IRAs are exempt from RMDs during the owner's lifetime.
Required Minimum Distributions are mandatory annual withdrawals from tax-deferred retirement accounts, including Traditional IRAs, 401(k)s, 403(b)s, and similar plans. The SECURE 2.0 Act raised the RMD starting age to 73 for those who turn 72 after 2022, with a further increase to 75 planned for 2033.
Your RMD for each year is calculated by dividing the prior-year-end account balance by a life expectancy factor from IRS Uniform Lifetime Table III. For example, a 73-year-old with a $500,000 IRA would use a factor of 26.5, making their RMD approximately $18,868.
Failing to take your full RMD results in a steep penalty — 25% of the amount not withdrawn (reduced from the previous 50% by SECURE 2.0). This drops to 10% if corrected within two years. Roth IRAs are not subject to RMDs during the account owner's lifetime, which is one of their key advantages for estate planning and tax-free wealth accumulation in retirement.
Related Terms
Traditional IRA
An individual retirement account where contributions may be tax-deductible and investments grow tax-deferred. The 2025 contribution limit is $7,000 ($8,000 if age 50+).
401(k)
An employer-sponsored retirement savings plan that lets you contribute pre-tax income (or after-tax with Roth 401(k)). The 2025 employee contribution limit is $23,500.
Roth IRA
A retirement account funded with after-tax dollars. Qualified withdrawals in retirement — including all growth — are completely tax-free. The 2025 contribution limit is $7,000 ($8,000 if 50+).
Penalty
A charge imposed by the IRS for filing late, paying late, or underpaying estimated taxes. Common penalties include failure-to-file (5% per month) and failure-to-pay (0.5% per month).