If you’re age 73 or older and have a tax-deferred retirement account like a traditional IRA, 401(k), or 403(b), the IRS requires you to take annual withdrawals called Required Minimum Distributions (RMDs). These withdrawals are designed to ensure that the government eventually collects taxes on your pre-tax savings.
Even if you’re still years away from retirement, understanding the RMD table is essential for long-term planning. This guide breaks down how the IRS calculates your RMD using life expectancy tables, how to read and apply the numbers, and the tax implications for retirees, financial advisors, and estate planners alike.
What Is an RMD and Who Needs to Take One?
Required Minimum Distributions (RMDs) are the minimum amounts you must withdraw each year from certain retirement accounts once you reach a specific age. The IRS requires these withdrawals to ensure that tax-deferred funds are eventually taxed, as you received a deduction or deferral when you originally contributed.
Under the SECURE Act 2.0, which took effect in 2023, the age at which RMDs begin increased to 73. Starting in 2033, that age will rise again to 75 for individuals born in 1960 or later. This change gives retirees a longer window to grow their retirement savings and explore tax planning strategies before mandatory withdrawals begin.
You must take RMDs if you:
- Own a traditional IRA, SEP IRA, SIMPLE IRA, or participate in an employer-sponsored retirement plan like a 401(k), 403(b), or 457(b)
- Are age 73 or older (or 75 if born in 1960 or later)
- Inherit a retirement account, even if you are under the RMD age (special inherited IRA rules apply)
RMDs do not apply to Roth IRAs during the original account holder’s lifetime, but they do apply to Roth 401(k) plans unless rolled over to a Roth IRA before the RMD start date.
Penalties for Not Taking an RMD:
If you fail to take your full RMD by the deadline (typically December 31), the IRS can impose a penalty of up to 25% of the amount you should have withdrawn. Fortunately, the penalty may be reduced to 10% if corrected promptly and if you file Form 5329 with a reasonable cause explanation.
Because of the significant tax implications, it’s crucial to plan ahead and ensure you take the correct amount each year. Working with a financial advisor or tax professional can help avoid costly mistakes and optimize your withdrawal strategy.
What Is the RMD Table?
The RMD table is a tool provided by the IRS to help retirees calculate how much they must withdraw each year from their tax-deferred retirement accounts once they reach the required age. It’s based on life expectancy and is designed to gradually draw down your retirement savings over your lifetime.
The IRS publishes several life expectancy tables, each tailored to different account owner scenarios. The most commonly used one is the Uniform Lifetime Table, which applies to most retirees who are the primary owners of their accounts and whose spouses are either the same age or less than 10 years younger.
Each table assigns a distribution factor, also known as a life expectancy factor, which corresponds to your age. This number is used as the divisor in the RMD formula: Account Balance (as of Dec. 31 of previous year) ÷ Distribution Factor = RMD
The distribution factor essentially reflects:
- The IRS’s estimate of your remaining life expectancy
- A schedule designed to ensure that your retirement funds are withdrawn gradually over time, while still leaving enough in the account to potentially grow
For example, at age 75, the Uniform Lifetime Table assigns a factor of 24.6. That means the IRS expects your withdrawals to be spread out over 24.6 years, and your RMD would be roughly 4.06% of your account balance that year.
Other IRS Life Expectancy Tables:
Depending on your circumstances, you might use a different RMD table:
- Joint Life and Last Survivor Table: Used when your spouse is more than 10 years younger than you and is your sole beneficiary. This table produces smaller RMDs, as it assumes a longer joint life expectancy.
- Single Life Expectancy Table: Primarily used by beneficiaries of inherited IRAs. This table provides a separate withdrawal schedule based on the beneficiary’s own age and is often used in stretch IRA strategies (though those have been largely phased out under new inheritance rules post-SECURE Act).
Choosing the correct table is essential for accurate RMD calculation. Misapplying the wrong table could result in either under- or over-withdrawing funds, leading to penalties or unnecessary taxation.
How to Use the RMD Table (With Example)
Calculating your Required Minimum Distribution (RMD) using the IRS Uniform Lifetime Table is a relatively simple process once you understand the steps. The goal is to determine the minimum amount you must withdraw each year based on your age and your account balance.
Here’s how to do it:
Step 1: Find Your Age in the IRS Uniform Lifetime Table
Locate your current age (as of the end of the tax year) on the IRS table. Each age has a corresponding distribution factor, which represents your remaining life expectancy in years, according to IRS estimates.
Tip: The IRS updates these tables occasionally, so always use the most current version.
Step 2: Locate the Distribution Factor
The distribution factor is the number used to divide your account balance to calculate the RMD. The older you are, the lower the distribution factor, which results in a larger RMD.
Step 3: Use Your Account Balance
Find the total value of your retirement account(s) as of December 31 of the previous year. This is the balance you’ll use in your calculation.
Step 4: Divide the Balance by the Factor
Use the formula: RMD = Account Balance ÷ Distribution Factor
This tells you the minimum amount you must withdraw for the current year.
Example
Let’s say you are 75 years old, and your total IRA or 401(k) balance on December 31 of the prior year was $500,000.
- According to the IRS Uniform Lifetime Table, the distribution factor for age 75 is 24.6.
- Your RMD would be: $500,000 ÷ 24.6 = $20,325.20
This is the minimum amount you must withdraw by December 31 of the current year to stay compliant with IRS rules.
Note: If you have multiple retirement accounts (e.g., several traditional IRAs), you must calculate the RMD for each account separately, but you can choose to withdraw the total amount from one or more accounts in any combination. However, this does not apply to 401(k)s—RMDs must be taken from each employer-sponsored plan individually.
New RMD Rules and Adjustments (SECURE Act 2.0)
Before 2020, retirees were required to begin taking Required Minimum Distributions (RMDs) at age 70½. However, with Americans living longer and often working into their later years, Congress made significant changes to these rules through the Setting Every Community Up for Retirement Enhancement (SECURE) Act and its sequel, SECURE Act 2.0, passed in 2022.
These legislative changes pushed back the required beginning date (RBD) for RMDs, giving retirees more flexibility in managing their tax-deferred retirement savings.
Updated RMD Start Ages Based on Birth Year:
| Birth Year | RMD Start Age |
| Before 1951 | 70½ |
| 1951–1959 | 73 |
| 1960 or later | 75 |
This delayed timeline provides a larger planning window for individuals to manage their income, conduct Roth conversions, and potentially reduce their future tax liability.
Planning Tip: If you’re in your 60s and not yet subject to RMDs, consider strategic withdrawals or Roth conversions while you’re likely in a lower tax bracket. This can help reduce the size of future RMDs and minimize the impact on Medicare premiums and Social Security taxation.
Monthly vs. Annual RMD Withdrawals
Once your RMD begins, you have the option to withdraw the full amount at once or spread it out over the year. The IRS only cares that you meet the minimum by December 31 (except for your first RMD, which has an April 1 deadline the following year).
Withdrawal Options
- Monthly RMDs: Withdraw 1/12 of your annual RMD each month
- Annual RMDs: Withdraw the entire required amount in one lump sum, typically at the end or beginning of the year
Pros and Cons
| Monthly Withdrawals | Annual Withdrawals |
| Provides smoother cash flow for budgeting | Allows funds to stay invested longer |
| Helps spread out tax liability evenly | Easier recordkeeping—just one transaction |
| May help manage annual tax bracket creep | Could face market timing risks if value dips before withdrawal |
| Potential to avoid spikes in Social Security taxation | Flexibility to choose withdrawal timing |
Financial Tip: Some retirees prefer taking quarterly or semiannual distributions as a hybrid approach, balancing growth potential and cash flow needs.
How RMDs Affect Social Security and Medicare
Your RMDs count as ordinary income, which means they increase your Adjusted Gross Income (AGI). This can trigger domino effects on other areas of your retirement finances:
1. Social Security Taxation
If your total income exceeds certain thresholds, a portion of your Social Security benefits becomes taxable:
- Up to 50% of your Social Security may be taxed if you’re a single filer with income over $25,000 or married filing jointly with income over $32,000
- Up to 85% becomes taxable if your income is higher
2. Medicare IRMAA Surcharges
Higher income may subject you to Income-Related Monthly Adjustment Amounts (IRMAA), which increase your Medicare Part B and D premiums. These surcharges are based on your modified adjusted gross income (MAGI) from two years prior.
For example, taking a large RMD at age 73 could increase your Medicare premiums at age 75.
3. Higher Tax Brackets
Large RMDs can push you into a higher tax bracket, particularly when combined with Social Security benefits and other income sources.
Mitigation Strategies:
- Make Roth conversions before RMD age to lower future balances
- Use Qualified Charitable Distributions (QCDs) to satisfy RMDs while reducing taxable income
- Coordinate withdrawals with Social Security start dates to minimize overlap
Conclusion & Planning Tips
While RMDs are mandatory for most retirees with tax-deferred retirement accounts, they don’t have to be a burden. With proper planning, you can minimize their tax impact, support your lifestyle goals, and even reduce the burden on heirs.
If you need assistance with RMDs, contact Dimov Tax today. Our team of professionals are here to present custom-tailored guidance.
FAQs
Is it better to take RMD monthly or annually?