Required Minimum Distributions (RMDs)

When RMDs start

SECURE 2.0 changed the starting age in phases:

• Born before 1951: RMDs started at 72 (or 70½ under prior law).
• Born 1951–1959: RMDs start at 73.
• Born 1960 or later: RMDs start at 75.

The rule takes effect the year you turn the starting age. You have until April 1 of the following year for your first RMD, then December 31 for every subsequent year. Delaying the first RMD to the following April means taking two RMDs that year, which often pushes you into a higher bracket — usually not worth it.

Which accounts

RMDs apply to:

• Traditional IRA (including SEP-IRA, SIMPLE IRA)
• Traditional 401(k), 403(b), 457(b)
• TSP (Thrift Savings Plan)
• Inherited IRAs (with different rules for inheritors)

RMDs do not apply to:

• Roth IRA (no lifetime RMD for original owner)
• Roth 401(k) — as of 2024, SECURE 2.0 eliminated lifetime RMDs from designated Roth accounts.
• Health Savings Accounts

Still-employed exception: if you're still working at age 75 and don't own 5%+ of the employer, you can delay RMDs from your current employer's 401(k) until retirement. IRAs and prior-employer 401(k)s still require RMDs.

How much

Each year's RMD is calculated as:

RMD = (Prior year-end balance) / (Life expectancy factor from IRS Uniform Lifetime Table)

Approximate factors:

The factors produce withdrawals approximately consistent with using up the balance across your life expectancy.

If your spouse is your sole beneficiary and more than 10 years younger, the Joint Life Table applies, which produces smaller RMDs.

The penalty for missing RMDs

Before SECURE 2.0 (pre-2023): 50% of the missed amount — one of the harshest penalties in the tax code.

After SECURE 2.0: 25%, reduced to 10% if corrected in a timely manner (typically within two years).

Still punitive enough that missing RMDs should never happen. Set calendar reminders. Many custodians will automate the distribution if you tell them to.

The tax hit

RMDs are fully taxable as ordinary income. On a $1M Traditional IRA at age 75, the RMD is about $40,700 — fully taxed at your marginal rate.

For retirees with large pre-tax balances, RMDs can push them into higher brackets, especially when combined with Social Security (which also gets taxed as other income rises) and other income sources. This is known as the "RMD torpedo" in planning circles.

Planning to reduce RMDs

Three main tools:

Roth conversions before 73. Converting pre-tax balances to Roth in your 60s reduces the Traditional balance subject to RMDs. Each $100k converted at 22% now avoids the same $100k being withdrawn at 32% later, plus avoids pushing Social Security into taxation. Covered in "Roth Conversions" and "Conversion Ladder Strategy."

Qualified Charitable Distributions (QCDs). At 70½+, you can direct up to $108,000 (2026) per year from your IRA directly to qualified charities, counting toward your RMD. The distribution doesn't show on your AGI, so it doesn't push up Social Security taxation or IRMAA. Great tool if you have charitable intent.

Spending down early. Taking distributions before 73 reduces the balance subject to future RMDs. Early-retirement years often have low income; withdrawing from Traditional at 12% rates avoids later withdrawals at higher rates.

Inherited IRA RMDs

The SECURE Act (2019) dramatically changed inherited IRA rules:

• Non-spouse beneficiaries inheriting after 2020 generally must empty the account within 10 years. If the original owner had begun RMDs, the beneficiary must also take annual RMDs during the 10 years, not just a lump at year 10.
• Spouse beneficiaries can treat the inherited IRA as their own, essentially delaying RMDs until their own RMD age.
• Eligible designated beneficiaries (disabled, chronically ill, minor children, beneficiaries within 10 years of the decedent's age) can stretch over their own life expectancy.

The 10-year rule eliminated the "stretch IRA" strategy that had been a major estate planning tool, forcing large distributions (and tax bills) to non-spouse heirs.

How Horizons uses this

Horizons calculates RMDs automatically at the correct starting age for your birth year. The engine applies the Uniform Lifetime Table factor each year and treats the RMD as ordinary income in your tax calculations. If your forecast shows RMDs pushing you into higher brackets or IRMAA tiers, the Roth Conversion page can help you model conversions to reduce the future impact.