Understanding Required Minimum Distributions (RMDs)
on Aug 8, 2025
If you’re heading into retirement—or already there—there’s one important rule you’ll need to plan for: Required Minimum Distributions, or RMDs. While the name sounds technical, the concept is simple. Once you reach a certain age, the IRS requires you to start taking money out of your tax-deferred retirement accounts like traditional IRAs and 401(k)s. Why? Because they want to start collecting the taxes you’ve deferred for years.
Thanks to the SECURE Act 2.0, the starting age for RMDs has recently changed:
- If you were born between 1951 and 1959, your RMDs begin at age 73
- If you were born in 1960 or later, they begin at age 75
This gives many retirees a bit more time to plan—whether that’s converting to a Roth IRA, using taxable accounts first, or simply letting your money grow a little longer. We covered this in more detail in our article, SECURE Act 2.0 May Change Your RMD Age.
How do RMDs work?
Each year, the IRS uses your prior year’s December 31 account balance and a life expectancy factor to calculate your required withdrawal. You can withdraw more if you’d like, but not less. If you don’t take your RMD by the deadline, you could face a steep penalty—50% of the amount you were supposed to withdraw (though recent law changes now allow for more leniency if corrected promptly).
And keep in mind, RMDs are taxable as ordinary income, so they can impact your overall tax picture, Social Security taxation, and even Medicare premiums. That’s why we always encourage building RMDs into your broader retirement income strategy.
Charitable Giving Strategy: QCDs
If you’re charitably inclined, there’s a smart way to meet your RMD and support a cause you care about: the Qualified Charitable Distribution (QCD). This allows individuals age 70½ or older to donate directly from their IRA to a qualified charity—up to $100,000 per year. QCDs count toward your RMD and don’t increase your taxable income.
We go deeper on how this works in our article, Give Your Way: Exploring the Many Paths to Charitable Giving.
3 Tips to Stay Ahead of RMDs:
- Track your age and know when your RMDs begin—missing one is costly.
- Set a reminder for the December 31 deadline each year (except for your very first RMD, which can be delayed to April 1).
- Work with your financial planner to coordinate withdrawals with your other income sources and tax planning opportunities.
The truth is, RMDs aren’t just about following IRS rules—they’re a key part of managing your retirement income wisely. With the right strategy in place, you can turn RMDs into a tool for reducing taxes, supporting causes you care about, and staying in control of your financial future.