Required Minimum Distribution (RMD)
The annual minimum amount that must be withdrawn from most retirement accounts after a specified age, taxed as ordinary income.
Detailed Explanation
Under SECURE 2.0, the RMD start age is 73 (rising to 75 for taxpayers born in 1960 or later). RMDs apply to traditional IRAs, SEP-IRAs, SIMPLE IRAs, and most employer-sponsored plans (401(k), 403(b), 457(b)). Roth IRAs have no RMDs during the owner's lifetime; SECURE 2.0 also eliminated RMDs from designated Roth 401(k) accounts. Penalties for missed RMDs were reduced from 50 percent to 25 percent (10 percent if corrected timely). Inherited retirement accounts follow distinct distribution rules under SECURE Act, including the 10-year rule for most non-spouse beneficiaries.
Key Points
- RMD start age is 73 (rising to 75 for those born in 1960 or later) under SECURE 2.0.
- Applies to traditional IRAs, SEP/SIMPLE IRAs, and 401(k)/403(b)/457(b) plans; taxed as ordinary income.
- Roth IRAs have no lifetime RMDs; SECURE 2.0 also removed RMDs from designated Roth 401(k)s.
- Missed-RMD penalty was cut from 50% to 25% (10% if corrected promptly).
- Most non-spouse beneficiaries must empty inherited accounts within 10 years.
Practical Example
A retiree turns 73 in 2026 with a $1,000,000 traditional IRA. Using the IRS Uniform Lifetime Table factor (about 26.5 at age 73), the first RMD is roughly $37,700, taxed as ordinary income. Failing to take it triggers a 25% penalty on the shortfall, reduced to 10% if corrected within the SECURE 2.0 correction window.
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Learn about Tax Planning & StrategyRelated Terms
SECURE 2.0 Act
A 2022 federal law amending retirement account rules, including RMD age changes, expanded catch-up contributions, automatic 401(k) enrollment, and new employer matching for student loan payments.
Qualified Charitable Distribution (QCD)
A direct transfer from an IRA to a qualified charity by a taxpayer age 70 and a half or older, satisfying the RMD without inclusion in taxable income.
Backdoor Roth IRA
A two-step strategy of contributing to a non-deductible traditional IRA and converting it to Roth, used by high-income earners who exceed direct Roth IRA contribution limits.
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