What Is a Required Minimum Distribution and When Does It Start?

What Exactly Is a Required Minimum Distribution?

A Required Minimum Distribution, commonly called an RMD, is the smallest amount of money the IRS requires you to withdraw from certain tax-deferred retirement accounts each year once you reach a specific age. The rule exists because the government gave you a tax break when you put money into accounts like a traditional IRA or 401(k). In return, the IRS expects you to eventually take that money out and pay income tax on it.

Think of it this way: the tax break was a deferral, not a free pass. RMDs are the government's way of making sure taxes eventually get paid.

When Do Required Minimum Distributions Start?

The starting age for RMDs has changed several times in recent years. Under the SECURE 2.0 Act of 2022, here is the current schedule:

• Born before 1951: RMDs already began at age 70½.
• Born 1951 through 1959: RMDs begin at age 73.
• Born 1960 or later: RMDs begin at age 75, starting in 2033.

Your first RMD must be taken by April 1 of the year after you reach the applicable age. Every RMD after that is due by December 31 of each calendar year. One important caution: if you delay your first RMD to the following April, you will need to take two distributions in the same calendar year (the delayed first one plus the current year's). That double withdrawal can create a noticeable bump in your taxable income.

Which Accounts Are Subject to RMDs?

RMDs apply to most tax-deferred retirement accounts, including:

• Traditional IRAs
• SEP IRAs
• SIMPLE IRAs
• 401(k) and 403(b) plans
• 457(b) government plans
• Profit-sharing plans

Roth IRAs are the notable exception. Original owners of Roth IRAs do not have to take RMDs during their lifetime. Starting in 2024, Roth accounts held inside employer-sponsored plans (like a designated Roth 401(k)) are also exempt from RMDs, thanks to the SECURE 2.0 Act. If you hold a Roth 401(k) and want to avoid any confusion, rolling it into a Roth IRA remains a straightforward option.

Still Working? There May Be an Exception

If you are still employed and participating in your current employer's 401(k) or 403(b), you may be able to delay RMDs from that specific plan until you actually retire. This is sometimes called the "still working" exception. It does not apply to IRAs or to plans from former employers. Check with your plan administrator to confirm eligibility.

How Is Your RMD Calculated?

The basic formula is simple division:

RMD = Account balance on December 31 of the prior year ÷ IRS life expectancy factor

The IRS provides life expectancy factors in the Uniform Lifetime Table, published in IRS Publication 590-B (available free at irs.gov). A different table, the Joint Life and Last Survivor Table, applies if your sole beneficiary is a spouse who is more than 10 years younger than you.

For example, if your traditional IRA balance was $500,000 on December 31 and your life expectancy factor from the table is 26.5, your RMD for the following year would be approximately $18,868.

If you hold multiple traditional IRAs, you must calculate the RMD for each account separately, but you can withdraw the total amount from any one or combination of your IRAs. Employer plans like 401(k)s are different: each plan's RMD generally must be taken from that specific plan.

What Happens If You Miss an RMD?

Missing an RMD used to carry one of the steepest penalties in the tax code: 50% of the amount you failed to withdraw. The SECURE 2.0 Act reduced that penalty to 25%. If you correct the error during the applicable correction window (generally within two years), the penalty may drop further to 10%. You would report the shortfall on IRS Form 5329.

Even with the reduced penalty, getting this right matters. Setting a calendar reminder in the fall, or asking your financial advisor or plan custodian to flag the deadline, can save you real money.

Tax Planning Strategies Around RMDs

Qualified Charitable Distributions (QCDs)

If you are 70½ or older and charitably inclined, a Qualified Charitable Distribution lets you send up to $105,000 per year (2024 limit, adjusted annually for inflation) directly from your IRA to a qualified charity. The distribution counts toward your RMD but is not included in your taxable income. This is one of the most tax-efficient ways to give. The transfer must go directly from the IRA custodian to the charity; you cannot deposit the funds in your personal account first.

Roth Conversions Before RMDs Begin

Some people convert portions of their traditional IRA to a Roth IRA in the years between retirement and the RMD start age. You pay income tax on the converted amount now, but future growth in the Roth is tax-free and not subject to RMDs. This strategy is not right for everyone. It works best when your current tax rate is lower than you expect it to be later, or when you want to reduce future RMDs and the tax burden they bring.

Oklahoma-Specific Considerations

Oklahoma does not tax Social Security benefits, and the state offers a retirement income exclusion of up to $10,000 per person ($20,000 for married couples filing jointly) on qualifying distributions from pensions, 401(k)s, and IRAs. Understanding how your RMDs interact with this state-level exclusion can meaningfully affect your total tax picture. The Oklahoma Tax Commission website (tax.ok.gov) has current details on this exclusion. Oklahoma residents can also reach out to the Oklahoma SHIP program for free guidance on how Medicare premiums, which are partly based on income, may be affected by large RMD withdrawals.

A Simple RMD Checklist

• Confirm your RMD start age based on your birth year.
• Gather December 31 balances for every tax-deferred retirement account you own.
• Use the IRS Uniform Lifetime Table (Publication 590-B) or ask your custodian to calculate the amount.
• Decide whether a QCD makes sense if you support charitable organizations.
• Take the distribution by December 31 (or April 1 of the year after you turn 73 for your very first RMD).
• Keep records and report the withdrawal on your tax return.

Where to Get Trustworthy Help

RMD rules sit at the intersection of tax law, investment management, and retirement planning. Getting personalized advice from a qualified professional, whether that is a CPA, a certified financial planner, or an enrolled agent, can help you avoid costly mistakes and build a withdrawal strategy that fits your whole financial picture.

If you are looking for a verified financial professional or retirement planning resource in the Oklahoma City area (or beyond), Second Half 365 can connect you. Visit our directory to find a vetted local expert who understands the questions that matter most in this chapter of life. You have worked hard to save this money. A little planning now helps make sure it works just as hard for you.