Required Minimum Distributions: A Practical Guide

Required minimum distributions, usually called RMDs, are annual withdrawals the tax rules require from many retirement accounts. They are easy to treat as an administrative task. In practice, they can affect the cash you have available, the taxes you owe, the accounts you keep invested, charitable giving, and the income plan your household relies on.

The useful first step is not finding a universal withdrawal formula. It is knowing which accounts are involved, when the first deadline applies, and how the distribution fits with the rest of the year. The rules can differ for IRAs, workplace plans, inherited accounts, and people still working. A clear process makes it less likely that a deadline or tax consequence catches you by surprise.

This guide is a practical starting point for organizing the conversation. It is not a substitute for tax or legal advice, especially when an account was inherited or an employer plan has its own terms.

1. Know which accounts may have an RMD

RMDs generally apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, and many workplace accounts such as 401(k)s and 403(b)s. They are minimum withdrawals, not a recommendation about how much you should spend. You may take more, but a larger withdrawal does not eliminate the need to understand the tax and planning effect of the additional amount.

Roth IRAs are different for the original owner. The IRS overview of RMDs says that Roth IRA owners generally do not have lifetime RMDs. Beneficiaries can face distribution rules, however, and designated Roth accounts or inherited accounts can involve details that deserve a closer look.

Create a simple account list before the year gets busy. Include the account owner, account type, prior December 31 balance, custodian, whether it is inherited, and whether the owner is still working. That inventory helps separate accounts that may be handled together from accounts that have to be considered on their own.

2. Put the first deadline on the calendar

For many people, RMDs begin at age 73. The first RMD can generally be taken by April 1 of the year after the year you reach that age. Future RMDs are generally due by December 31 each year. The later first deadline may sound helpful, but it can result in two taxable distributions landing in the same calendar year.

For example, someone who turns 73 during a year may have an RMD for that year, even if the first withdrawal is not made until the following April. The next year’s RMD is still generally due by December 31. Whether taking both distributions in one year is sensible depends on the full tax picture, not just the deadline.

The IRS publishes RMD FAQs that explain the general timing rules and account exceptions. If you are still employed, ask the plan administrator whether the plan’s rules permit a later starting date. Do not assume a workplace account follows the same timing as an IRA.

3. Understand how the amount is determined

An RMD is generally calculated by taking the prior December 31 account balance and dividing it by the distribution period from an IRS life-expectancy table. A spouse who is more than 10 years younger and the sole beneficiary can change which table applies. Inherited accounts can follow a very different set of rules.

Most custodians provide a calculation for the accounts they hold, but that calculation is only one part of the job. Review the account balance and beneficiary information behind it, then confirm whether you have accounts elsewhere that need separate treatment. The IRS comparison chart for IRAs and defined-contribution plans is useful for understanding why the withdrawal mechanics can differ.

Precision matters here. An estimate can help you plan cash flow, but use the official calculation and account records before scheduling the distribution. If your circumstances include an inherited account, an annuity inside an IRA, a divorce, a recent death, or more than one beneficiary, get qualified guidance rather than forcing a simple rule onto a complicated situation.

4. Decide what job the distribution should do

An RMD does not have to become spending money by default. Some households use it to support regular living costs. Others hold part of the proceeds for a future expense, pay estimated taxes, make a gift, or reinvest money in a taxable account after the required withdrawal has occurred. The right choice depends on the plan, not the rule alone.

Start with the income you need this year. The site’s guide to retirement income sources can help you list Social Security, pensions, work income, savings, investments, and other available resources. Then identify which spending the RMD will cover, whether taxes should be withheld, and whether an upcoming purchase or gift needs to be reflected in the plan.

That context also matters for investments. Taking an RMD means withdrawing from a tax-deferred account, but it does not automatically determine which holdings to sell or how the rest of your portfolio should be positioned. Consider the cash need, the account’s investments, the time horizon for other assets, and the level of risk you are willing to keep.

5. Look beyond the RMD itself to the tax picture

Traditional retirement-account distributions are generally included in taxable income, subject to the details of the account and prior tax treatment. That can affect more than one line on a return. It may interact with other income, capital gains, deductions, the taxation of Social Security benefits, and Medicare premium considerations.

That does not mean every RMD should be treated as a problem to minimize. The withdrawal is part of a larger retirement plan, and needed income still needs a source. The goal is to understand the tradeoffs early enough to coordinate with a qualified tax professional. The tax diversification guide explains why taxable, tax-deferred, and tax-free account types can create different choices over time.

If charitable giving is already important to you, ask a qualified professional whether a qualified charitable distribution may be relevant. It has eligibility and timing requirements. It is not simply a charitable gift made after withdrawing the RMD, and the details should be confirmed before acting.

6. Treat inherited accounts as a separate question

Inherited IRAs and retirement accounts are an area where a general RMD checklist can be misleading. The applicable distribution period may depend on the relationship to the original owner, the original owner’s age at death, when the death occurred, whether the beneficiary is an eligible designated beneficiary, and other facts.

Keep the beneficiary statement and the account’s year-of-death information with your planning documents. The IRS’s Publication 590-B contains detailed distribution guidance, but an inherited account is often worth reviewing directly with a tax professional or advisor familiar with the account details. A missed assumption can affect multiple years, not just one withdrawal.

If you inherited an account, avoid copying a distribution pattern from a parent, spouse, sibling, or friend. Similar-sounding accounts can have different rules. The best next step is to identify the facts that control the rule before moving money.

Questions to bring to an RMD review

A good review does not need to begin with a complicated spreadsheet. A short set of questions can reveal whether the distribution is connected to the rest of your plan:

• Which account or accounts have an RMD this year, and which must be handled separately?
• What is the deadline for each required distribution, including the first-RMD timing if it applies?
• How much cash does the household need this year, and how much tax withholding, if any, should be considered?
• Will the distribution affect other income, a planned gift, an investment sale, or an upcoming major expense?
• Have beneficiary designations, inherited-account details, and contact information been reviewed recently?
• Which questions belong with a tax professional, estate attorney, plan administrator, or financial-planning conversation?

Writing down the answers creates a record you can revisit next year. It can also help a spouse or family member understand what happens, which accounts matter, and who to contact if they need to step in. That kind of organization is valuable even when the annual distribution itself is straightforward.

Common RMD mistakes to avoid

Most RMD problems come from an incomplete picture, not from a lack of effort. An account owner may assume every retirement account can be handled the same way, overlook an old employer plan, or rely on a prior year’s instructions after a change in work, beneficiaries, or family circumstances. A checklist is more useful than a last-minute guess.

One common issue is treating the April 1 first-RMD deadline as though it replaces the next December 31 deadline. It does not. Another is assuming a distribution from a Roth IRA will satisfy an RMD from a traditional IRA or workplace plan. It generally will not. A third is overlooking a small inherited account because it does not feel central to the household plan. Small accounts can still carry their own distribution rules.

Withholding also deserves an intentional decision. A custodian may offer it, but the amount should be considered alongside projected income, estimated tax payments, and the timing of the withdrawal. Similarly, automatic distribution instructions can be convenient, but they should be reviewed when account balances, cash needs, family goals, or tax circumstances change.

If you believe an RMD was missed or the amount was too small, act promptly. Gather the account records, confirm the calculated amount, and speak with a qualified tax professional about the correction process. The IRS FAQ guidance explains that an excise tax may apply, while certain corrections can affect the amount owed. The important point is to address the issue with the facts in hand instead of hoping it resolves itself.

7. Build an annual RMD review into your plan

A brief annual review can reduce last-minute decisions. Start early enough to gather statements and have a tax conversation before the end of the year. Review the account list, beneficiary designations, expected income, cash needs, charitable goals, estimated tax payments, and any distribution instructions already set up with the custodian.

It also helps to revisit the broader withdrawal plan. The guide to retirement withdrawal strategies walks through the questions that connect spending, account types, taxes, investments, and changing priorities. An RMD is one required distribution, but it should not be the only reason you look at the bigger plan.

Set a reminder well before year-end rather than waiting for December. That leaves time to confirm instructions with a custodian, coordinate with a tax professional, and decide whether the distribution should be sent to a bank account, used for taxes, directed to an eligible charity, or invested in a taxable account. It also leaves room to correct an account-record or beneficiary question without turning a planning decision into a deadline problem.

Marco Lima, CFP® helps individuals and families bring retirement income, investments, taxes, protection, and legacy priorities into one connected conversation. If an RMD deadline is approaching, retirement income planning can provide a useful framework for organizing the questions that matter before you make the withdrawal.