Required Minimum Distributions (RMDs): The Final Tax Obligation

The Current RMD Age for 2026

Under the SECURE 2.0 Act, the age at which individuals must begin taking Required Minimum Distributions (RMDs) has been increased to 73. This specific age applies to anyone born between 1951 and 1959. For those born in 1960 or later, the RMD age is scheduled to increase further to 75 starting in 2033. This policy change allows retirees to keep their funds invested for a longer period, benefiting from additional tax-deferred growth before the IRS mandates the start of taxable withdrawals.

The “Required Beginning Date”

Your first RMD is generally due by April 1 of the calendar year following the year you turn 73. For example, if you reach age 73 in 2025, your “Required Beginning Date” is April 1, 2026. However, taking advantage of this delay means you will have to take two RMDs in the same year: the deferred 2025 distribution by April 1st and your 2026 distribution by December 31st. This concentration of income can potentially push you into a significantly higher tax bracket for that specific year.

Exemption for Roth 401(k) Accounts

As of January 1, 2024, a major shift in policy eliminated RMD requirements for Roth 401(k) and Roth 403(b) accounts during the original owner’s lifetime. Previously, while Roth IRAs were exempt from RMDs, employer-sponsored Roth accounts were not. Now, these accounts are treated similarly to Roth IRAs, allowing participants to keep their after-tax savings in the plan indefinitely. This change simplifies retirement planning and removes the need for many retirees to roll over their Roth 401(k) into an IRA simply to avoid forced distributions.

Calculating the Annual Distribution

The amount of your RMD is determined by a simple mathematical formula: the fair market value of your account as of December 31 of the previous year, divided by a “distribution period” found in the IRS Uniform Lifetime Table. For an individual aged 73, the distribution period is currently 26.5 years. This means if you have $1,000,000 in your account, your first RMD would be approximately $37,736. As you age, the distribution period decreases, which requires you to take out a larger percentage of your remaining balance each year.

Penalties for Non-Compliance

The penalty for failing to take the full amount of an RMD by the deadline has been reduced by the SECURE 2.0 Act, though it remains substantial. For 2026, the excise tax on the amount not withdrawn is 25%. However, if the error is corrected within a “correction window” (generally two years), the penalty can be further reduced to 10%. To avoid these charges, many retirees set up “automatic RMD” services with their plan providers, which calculate and distribute the correct amount every December on their behalf.

The “Still Working” Exception

If you are still employed past age 73, you may be able to delay RMDs from your current employer’s 401(k) plan until the year you actually retire. This “still working” exception is only available if your employer’s plan document specifically allows it and if you do not own more than 5% of the company. It is important to note that this exception only applies to the plan of your current employer; you must still take RMDs from any traditional IRAs or 401(k) plans held at previous companies once you reach the required age.

Primary Information Source

Internal Revenue Service (IRS): Retirement Plan and IRA Required Minimum Distributions FAQs