If you are entering retirement, understanding how required minimum distributions (RMDs) work is not optional. It is essential. The rules carry real financial consequences, and they have changed significantly over the past several years.
Tax-deferred accounts are subject to RMDs, which means account holders must withdraw a set minimum amount each year. Original owners of Roth IRA, Roth 401(k), and Roth 403(b) accounts are exempt from this requirement during their lifetimes. That exemption became broader when SECURE 2.0 eliminated lifetime RMDs from designated Roth accounts in employer plans, effective 2024.
Consult a financial advisor before calculating your RMD. The rules are detailed, and the penalties for getting them wrong are real.
No. 1: Secure 2.0 Increased the RMD Age to 73 (and 75 Is Coming)
SECURE 2.0 is legislation passed in late 2022 designed to expand retirement savings options for Americans. Its provisions include automatic enrollment for new workplace plans, penalty-free emergency withdrawals, enhanced catch-up contributions for older workers, and a higher RMD starting age. The central purpose: give retirement savers more time for their money to compound before mandatory withdrawals begin.
Under current rules, if you were born before July 1, 1949, your RMD started at age 70.5. If you were born between July 1, 1949, and December 31, 1950, the threshold was 72. If you were born between January 1, 1951, and December 31, 1959, your RMD starting age is 73. A second increase is scheduled: beginning January 1, 2033, the RMD age rises to 75 for those born in 1960 or later. That two-step framework gives the youngest savers still working today a significantly longer runway before mandatory withdrawals arrive.
No. 2: The RMD Aggregation Rules: Where You Can (and Cannot) Combine
How different accounts interact when you satisfy your RMD is critical to avoiding IRS penalties. For traditional IRAs, including SEP and SIMPLE IRAs, you must calculate the RMD for each account separately. However, you can total those amounts and withdraw the entire sum from a single IRA, or spread it across multiple accounts. A parallel aggregation rule applies to 403(b) plans: you may satisfy the combined required distribution from a single 403(b) account.
The flexibility stops there. No aggregation is permitted for 401(k) and 457(b) plans. The specific RMD must be calculated and withdrawn from each individual employer plan separately. Inherited accounts add another layer of complexity. RMDs for accounts inherited from different individuals cannot be combined or cross-applied under any circumstance.
No. 3: Secure 2.0 Reduces the RMD Penalty
Under the old rules, missing an RMD triggered a steep 50% excise tax on the amount that should have been withdrawn. SECURE 2.0 cut that penalty to 25%, giving retirees more room to recover from an oversight. The IRS further reduces the excise tax to 10% when the shortfall is corrected and the RMD is timely withdrawn within two years of the original due date.
The IRS states that if an account owner fails to withdraw the full RMD by the due date, the undistributed amount may be subject to a 25% excise tax, reduced to 10% if corrected within two years. Promptly identifying any missed distribution is worth the effort: catching the error early can cut the penalty by more than half and avoids the need to file a penalty abatement request with the agency.
No. 4: New Rules for Inherited Accounts
The original SECURE Act of 2019 required non-spouse beneficiaries to deplete inherited retirement accounts within 10 years of the account holder’s death. SECURE 2.0 retained that 10-year rule and added specific guidance based on when the original owner died. Eligible designated beneficiaries, including spouses, chronically ill or disabled individuals, and anyone within 10 years of the owner’s age, can still stretch distributions over their single life expectancy.
Adult children and other designated beneficiaries face stricter terms. If the owner died before reaching their Required Beginning Date, the heir must empty the account entirely by December 31 of the 10th anniversary year, with no annual interim RMDs required along the way. If the owner died on or after their Required Beginning Date, the beneficiary must take annual RMDs in years one through nine based on life expectancy and then fully drain the account by the tenth year. The IRS issued final regulations on July 19, 2024, and ended its enforcement waiver on this annual-distribution requirement after 2024, meaning the rule is now fully operative starting in 2025.
Further information on this topic can be found on this IRS page.
No. 5: Secure 2.0 Increases Catch-Up Contributions
Starting January 1, 2025, individuals ages 60 to 63 became eligible for enhanced “super” catch-up contributions of up to $11,250 a year to a qualifying workplace plan, a figure that holds at $11,250 in 2026 as well. That amount replaces, rather than supplements, the standard catch-up limit. The standard limit itself rose from $7,500 to $8,000 in 2026 for workers age 50 and older, on top of the base 401(k) deferral limit of $24,500. Coordinating those figures with a financial advisor is worthwhile, since plan sponsors are not required to offer the super catch-up option.
A Roth catch-up requirement also took effect in 2026. If you earned more than $150,000 in prior-year FICA wages from the employer sponsoring your plan, all catch-up contributions to that workplace plan at age 50 or older must now be made to a Roth account in after-tax dollars. The $150,000 threshold for 2026 reflects an inflation adjustment from the original $145,000 baseline set by SECURE 2.0 and will continue to be adjusted going forward. Workers at or below the threshold remain exempt. If your employer’s plan does not currently offer Roth contributions, that limitation could prevent any catch-up contributions at all, so checking with your plan administrator is a practical first step.
No. 6: Neutralize the RMD Tax Shock with a QCD
RMDs from traditional accounts are taxed as ordinary income. That added income can push you into a higher tax bracket or trigger Medicare premium surcharges. If you do not need the RMD proceeds for living expenses and you have charitable intentions, a Qualified Charitable Distribution (QCD) offers a powerful alternative. Anyone age 70.5 or older can transfer up to $111,000 directly from an IRA to an eligible charity in 2026, up from $108,000 in 2025. That transfer satisfies your annual RMD obligation, either in full or in part, and the distributed amount is excluded entirely from your adjusted gross income. Married couples filing jointly can each make a QCD from their own IRAs, for a combined potential exclusion of $222,000.
The QCD’s value is particularly strong in 2026. The One Big Beautiful Bill Act, signed into law on July 4, 2025, now limits the deductibility of itemized charitable contributions to amounts exceeding 0.5% of adjusted gross income and caps the tax benefit at 35% for taxpayers in the top bracket. A QCD bypasses both of those restrictions because it is an above-the-line exclusion from income, not a deduction. SECURE 2.0 also permits a one-time QCD of up to $55,000 to fund a Charitable Remainder Trust or a Charitable Gift Annuity, inside the $111,000 annual limit.
How to Calculate Your RMD
The IRS formula for calculating your RMD draws on three inputs: your total account balance as of December 31 of the prior year, your current age, and the applicable life expectancy factor from the IRS Uniform Lifetime Table. The agency divides the account balance by that factor, which represents the number of distribution years the IRS assigns to your age group. For a reference table, see the IRS Uniform Lifetime Table provided by Capital Group.
A straightforward example illustrates the math. A 73-year-old has a life expectancy factor of 26.5 under the IRS table. If the prior December 31 account balance was $250,000, the RMD equals $250,000 divided by 26.5, producing a required withdrawal of $9,433.96. One important exception applies: if your spouse is the sole beneficiary and is more than 10 years younger than you, a different IRS table applies and your RMD will be lower. Additional calculation guidance is available on IRS Publication 590-B. Review your specific situation with a financial advisor before making any withdrawal decisions.
Editor’s note: This pass updated the 2026 QCD annual limit to $111,000 (from $108,000 in 2025) and added that married couples can collectively exclude up to $222,000; it confirmed the Roth catch-up wage threshold of $150,000 for 2026 as an inflation-adjusted figure from the original $145,000 SECURE 2.0 baseline; and it noted that the One Big Beautiful Bill Act was signed into law on July 4, 2025, providing clearer context for the new 0.5% AGI floor and 35% cap on itemized charitable deductions.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks