If you’ve been diligently saving in your 401(k) or traditional IRA for decades, you’ve done the hard part. But the thing is… the IRS won’t let you defer those taxes forever. Once you hit a certain age, Uncle Sam comes knocking with something called Required Minimum Distributions (RMDs). And if you ignore them, you’ll be faced with penalties.
TL;DR: RMDs are the minimum amounts you must withdraw from your retirement accounts each year. You generally need to start taking withdrawals when you reach age 73. Miss one, and you could face a steep penalty (an excise tax of 25% on the amount not withdrawn, potentially reduced to 10% if you fix it within two years). That’s why working with a knowledgeable tax professional or accountant like JBS Corp can save you major headaches.
What Is an RMD?
You’ve been getting tax deductions for years by contributing to accounts like traditional IRAs, 401(k)s, 403(b)s, and similar plans. The government let you grow that money tax-deferred, but they always planned to get their cut eventually. An RMD is essentially the IRS ensuring your retirement funds don’t remain tax-sheltered forever.
Starting at a certain age (now 73 if you were born between 1951–1959, or 75 if born 1960 or later), you must begin withdrawing at least a calculated minimum amount each year. That withdrawal is added to your taxable income for the year. The IRS uses life expectancy tables to figure out the minimum… basically, they divide your account balance by a life expectancy factor to make sure you don’t just sit on that money forever. In other words, the rules are designed to gradually drain your account over your lifetime (and collect taxes on it) rather than letting you avoid tax forever.
Which Accounts Require RMDs?
Not all retirement accounts play by the same rules. Here’s the breakdown of accounts subject to RMDs:
- Traditional IRAs (including SEP IRAs and SIMPLE IRAs)
- Employer plans like 401(k) plans, 403(b) plans, 457(b) plans, and profit-sharing plans
The exception: Roth IRAs. Since you already paid taxes on Roth contributions, the IRS doesn’t force you to take distributions from a Roth IRA during your lifetime. And thanks to recent law changes (the SECURE 2.0 Act), Roth accounts in employer plans (like Roth 401(k)s or 403(b)s) are now free from RMDs as well. In short, any tax-deferred retirement account is subject to RMDs, while tax-free Roth accounts are generally off the hook for RMDs (at least until they pass to your heirs).
When Do You Have to Start Taking RMDs?
Your first RMD is due by April 1 of the year after the year you turn the RMD age (73 for most people now, or 75 for the younger cohort in the future). After that, each annual RMD must be taken by December 31 of that year.
Example from the IRS website: John reached age 73 on August 20, 2024. He must receive his 2024 required minimum distribution by April 1, 2025, based on his 2023 year-end balance. John must also receive his 2025 RMD by December 31, 2025, based on his 2024 year-end balance.
Here’s where people trip up: if you delay your very first RMD until the following April, you’ll end up having to take two distributions in that same calendar year (one by April 1 and one by December 31). Taking two RMDs in one year can bump you into a higher tax bracket – which nobody wants. For example, if you turn 73 in 2025 and wait until March 2026 for your first withdrawal, you’ll also have to take your 2026 RMD by the end of 2026. That double hit could mean more of your money taxed at a higher rate. Most advisors recommend taking your first RMD in the year you reach the required age to avoid doubling up in one year.
(Note: Still working at 73? If you’re still employed and have money in your current employer’s 401(k), you might be able to delay RMDs from that particular account until after you retire, thanks to the “still-working” exception. This generally applies if you don’t own more than 5% of the company and if your plan allows deferring RMDs until retirement. So if you’re 73+ and still on the job, check your plan rules, because you might not have to take RMDs from that workplace plan just yet.)
How Much Do You Need to Withdraw?
The IRS calculation isn’t too complicated, but it does require attention to detail. The formula is basically:
- Take your account balance as of December 31 of the previous year.
- Divide it by the IRS life expectancy factor (distribution period) for your current age.
The result is your RMD for the year. As you age, the distribution period gets shorter (meaning the percentage of your balance you must withdraw increases each year). For example, at age As of the time of writing this article (December 2025), 73 the IRS divisor is about 26.5, which works out to roughly 3.8% of your balance; by age 85 the divisor is 16.0 (about 6.25% of your balance).
What Happens If You Miss an RMD?
Historically, the penalty for failing to take an RMD was brutal – a 50% excise tax on the amount you should’ve withdrawn but didn’t. Recent changes have made it a bit less draconian: as of 2023, the penalty dropped to 25% of the missed RMD, and if you correct the mistake quickly (generally within 2 years and file the proper form), it can be reduced further to 10%. Still, even a 10% or 25% penalty is a huge chunk of money to lose for nothing.
Looking for Help Reducing Your Taxes?
At JBS Corp, we’ve helped individuals across the country navigate the ins and outs of RMD rules. We’ve seen it all, from first-timers confused about the tables to seasoned retirees looking to optimize their withdrawals. No matter who you are, rest assured that our team can help you minimize tax hits. You don’t have to figure this out alone or stay up at night stressing over IRS tables and deadlines.
Ready to talk strategy? Reach out to JBS Corp today. We’ll make sure you’re taking the right amount, at the right time, in the right way, so you can actually enjoy retirement, instead of worrying about whether you’re doing RMDs correctly. Let’s turn what could be a headache into just another manageable part of your financial plan.
