Required Minimum Distributions: 12 Common RMD Questions and Answers

If you are a retiree or close to retirement you most likely have questions about Required Minimum Distributions (RMDs). Once you reach a certain age, you must start making withdrawals from your traditional retirement savings plan to avoid tax penalties.

Here is a list of 12 common RMD questions and answers to help you prepare to take your Required Mininum Distributions.

1. What are RMDs?

Required Minimum Distributions (RMDs) are the minimum amounts you must withdraw annually from traditional IRAs, 401(k)s, 403(b)s, and other qualified retirement plans once you’ve reached the mandatory age. These withdrawals are generally taxable as income (unless made from after-tax contributions).

2. When are RMDs required?

The age at which you must begin RMDs depends on your birth year, under SECURE Act 2.0:

• Born 1950 or earlier: You are subject to earlier RMD rules.
• Born 1951 – 1959: RMDs begin at age 73. (Ascensus)
• Born 1960 or later: RMDs begin at age 75 (effective 2033) (Ascensus)

First RMD deadline: April 1 of the year following the year you reach your required beginning age. (Milliman)

Subsequent RMD deadlines: December 31 each year thereafter. (Milliman)

Important: If you delay your first RMD until April 1, you may end up having two distributions in the same year (the deferred first RMD plus that year’s required RMD), potentially increasing your taxable income.

Also, note: For employer-sponsored plans, in some cases you may defer RMDs until retirement (if you are not a 5% owner), depending on plan rules. (Congress.gov)

3. How are RMD’s Calculated?

The RMD is determined by dividing your account balance (as of December 31 of the previous year) by a life expectancy factor from IRS tables (Publication 590-B. IRS)

If your spouse is more than 10 years younger and is your sole beneficiary, a separate table (Joint Life and Last Survivor expectancy) may apply. (IRS)

Have questions about your RMDs? Give us a call! 

4. What if I don’t take any distributions, or if I don’t take enough?

If you fail to take the required minimum distribution (or take less than required), you could incur an excise tax of 25% of the shortfall. (Fidelity)

If the shortfall is corrected in a timely manner (typically within two years), the penalty may be reduced to 10%. (Fidelity).

** We strongly advise you to talk to your financial advisor or tax specialist befor making decisions to delay or take less than the rewuired minimum distribution. 

You can request a waiver if the failure was due to reasonable error and you are taking steps to fix it. This is done by filing Form 5329 with a letter of explanation. (IRS)

5. Can I withdraw more than the minimum required amount?

Yes. You are free to take more than your RMD. However:

• Excess withdrawals do not reduce future RMD amounts.
• All withdrawals are typically taxable as income (unless they derive from after-tax contributions).

6. Must I take the RMD separately from each account?

• IRAs: You calculate separately for each traditional IRA, but you may aggregate the total across them and take the RMD from one or more of them. (IRS)
• 403(b) contracts: Similar aggregation rules apply. (Voya)
• 401(k), 457(b), other employer plans: RMDs must be taken separately from each plan (you generally cannot aggregate across different employer plans). (Voya)

What is a QCD (Qualified Charitable Distribution)?

Ever wondered how to support your favorite charities while potentially lowering your taxable income?

In this quick video, we introduce and unpack Qualified Charitable Distributions (QCDs)—a powerful financial tool for retirees age 70½ or older. If you don’t rely on your RMDs for income needs talk to your financial advisor about the potential benefits of QCDs. 

7. Do ROTH IRAs require RMDs?

• During your life: Roth IRAs are exempt from lifetime RMDs. (IRS)
• Inherited Roth IRAs: Beneficiaries may face RMD rules, depending on their status. (Fidelity)

Designated Roth accounts in employer plans (e.g. Roth 401(k)): As of 2024, the IRS eliminated the requirement for pre-death RMDs on Roth accounts in employer plans. (Ascensus)

8. What is the 10-year rule?

For most non-spouse beneficiaries who inherit retirement accounts, the SECURE Act requires the entire balance to be withdrawn by December 31 of the 10th year following the account owner’s death. (Fidelity)

• If the owner died before they were required to take RMDs, the 10-year rule typically applies without annual RMDs. (Voya)
• If the owner died after RMDs began, the beneficiary may have to take annual RMDs during the 10-year period in addition to emptying by the 10th year. (Voya)

Exceptions apply for eligible designated beneficiaries (EDBs), such as:

• Surviving spouse
• Minor children (until majority)
• Disabled or chronically ill individuals
• A beneficiary no more than 10 years younger than the original owner
  Such EDBs may be eligible to stretch distributions over their life expectancy rather than the 10-year rule. (Voya)

Example:

Mary, age 76, dies in 2024 with a traditional IRA. She had already begun taking RMDs, since her required beginning date (RBD) was age 73. Her adult son, James (age 50), is the designated beneficiary.

Because Mary died after her RBD (Required Beginning Date – the deadline by which an IRA or retirement plan owner must take their first RMD), James must follow the 10-year rule with annual RMDs. That means:

• James must begin taking annual RMDs based on his own life expectancy starting in 2025.
• In addition, the entire account must be emptied by December 31, 2034 (the 10th year after Mary’s death).

If James later passes away in 2028 and names his daughter Sarah as successor beneficiary, Sarah must continue withdrawals under the 10-year rule. She would need to fully distribute the account by 2034, since the original 10-year clock from Mary’s death does not reset.

Trump’s Tax Bill – The “One Big Beautiful Bill” Important Tax Updates

Trump’s Tax Bill, or better know as the “One Big Beautiful Bill,” was recently enacted and it brings significant changes that could impact your financial and tax planning, especially if you’re in or nearing retirement.

Before making any financial moves, we highly recommend you discuss your options with your financial advisor.

With almost 900 pages in this legislation, including a large collection of tax breaks, spending cuts, and more; this article highlights some of the key tax provisions to help you understand how these changes impact you, and could potentially present opportunities for optimizing your financial strategy.

9. What if the account owner dies before RMDs have begun?

• Pre-2020 (before SECURE Act): Inherited IRA rules (stretch or 5-year rule) could apply.
• Post-2019 (after SECURE Act): The 10-year rule generally applies to most non-spouse beneficiaries, regardless of whether the account owner had begun RMDs. (Voya)

As above, exceptions exist for EDBs who might still use life expectancy-based distributions. (Voya)

See the IRS Required Minimum Distributions for Beneficiaries chart and IRS Publication 590-B, for complete details on when beneficiaries must start receiving RMDs and use the Single Life Expectancy Table found in the publication to compute the amount owed.

10. Do annuities require RMD’s?

• If the annuity is held within a qualified account (IRA, 401(k), etc.), yes — it is subject to RMD rules. (Voya)
• Non-qualified annuities (after-tax funds) are not subject to RMDs but follow their own tax and distribution rules.
• QLACs (Qualified Longevity Annuity Contracts): A portion of your retirement funds may be deferred beyond the RMD start age using QLACs under special rules.

(For tax treatment of qualifying longevity annuity contracts (QLACs), see the IRS’s Form 1098-Q info page.)

11. What are my brokerage firm’s reporting obligations for RMDs?

Custodians and trustees of IRAs are required to either calculate your RMD or offer to calculate it and notify you. (IRS)

However, one thing the IRS makes very clear is that RMD calculations are ultimately the taxpayer’s responsibility, so don’t rely blindly on calculations by your IRA custodian or retirement plan administrator. (Wolters Kluwer)

Tools such as FINRA’s RMD Calculator can also be helpful, as can the assistance of a financial and/or tax professional. 

12. What if a mistake is made when calculating or taking my RMDs?

Don’t worry; all is not lost if you make a mistake on your RMD calculations. While there are consequences, you also have options to correct a mistake. 

• File Form 5329 to report missed or incorrect distributions. (IRS)
• Attach a letter of explanation stating that the shortfall was due to reasonable error and that you’re taking steps to remedy it. (IRS)
• If approved, the IRS may waive the excise tax or reduce it (often to 10%) if corrected promptly. (IRS)
• The IRS offers a Voluntary Correction Program (VCP) as one avenue to request relief for certain RMD failures. (IRS)

We hope this article takes some of the stress out of your RMDs. Retirement is complicated, and peace of mind in retirement requires a plan.

Schedule a complimentary consultation with us today to get your questions answered and feel confident about your financial future. 

RMD RESOURCE CHEAT SHEET:

FINRA and the IRS are great resources that provide important taxpayer information about RMDs.

• Frequently Asked Questions: FAQs
• A chart highlighting basic RMD rules for IRAs and defined contribution plans, plus and resources to help you accurately compute your annual RMDs.
• A beneficiary distributions chart and the correction of miscalculations or missed RMD obligations.
• According to the IRS, if you have a 401(k) or another employer-sponsored plan, including the federal government’s Thrift Savings Plan, your plan sponsor or administrator should calculate the RMD for you.
• Investors should carefully double-check any firm’s RMD computation using the IRS’s RMD worksheets.
• IRS Required Minimum Distributions for Beneficiaries chart
• FINRA’s RMD Calculator
• Hear More About RMDs

What to hear more about this topic? Listen to our episode of Beacon Retirement Strategies: The Key to Managing Required Minimum Distributions and Saving Money in Retirement.