A tax-deferred retirement account is a deferral, not an exemption, and the deferral has an end date. From age 73 the account holder must withdraw a minimum amount each year and pay income tax on it, whether or not the money is needed.
The rules are not complicated, but two of them cost people money often enough to be worth stating plainly: the deadline in the first year works differently from every year after it, and the penalty for missing a withdrawal is charged on the amount not taken rather than on the tax owed.
Which accounts, and which are exempt
Required minimum distributions apply to traditional IRAs, SEP IRAs, SIMPLE IRAs and workplace retirement plan accounts such as 401(k)s.
They do not apply to Roth IRAs during the owner's lifetime, and since a change in the law they no longer apply to designated Roth accounts inside a 401(k) or 403(b) either. In the IRS's wording, withdrawals from Roth IRAs and designated Roth accounts "are not required until after the death of the account owner." That last clause matters: the exemption belongs to the owner, not to the account. People who inherit a Roth IRA or a designated Roth account are subject to distribution rules.
The first-year trap
The general deadline is December 31 each year. The first distribution is the exception: it may be deferred to April 1 of the following year.
Deferring it does not skip a year. The IRS illustrates the point with a person who turns 73 in 2024: the first distribution is due by April 1, 2025 and the second by December 31, 2025. Both fall in the same tax year, so two withdrawals are taxed as one year's income, which can raise the marginal rate applied to the second and can affect anything else that keys off income for that year.
Taking the first distribution by December 31 of the first year avoids the doubling up. Which of the two is better depends on where income falls in each year, and that is a calculation about a particular person's circumstances rather than a general rule.
How the amount is set
The calculation divides the account balance as of December 31 of the previous year by a life expectancy factor drawn from an IRS table, set out in Publication 590-B.
Most owners use the Uniform Lifetime Table. An owner whose sole beneficiary is a spouse more than ten years younger uses the Joint and Last Survivor Table instead, which produces a longer expectancy and therefore a smaller required withdrawal. Beneficiaries use the Single Life Expectancy Table.
The result is a floor, not a cap. Withdrawing more is always allowed; it is only the shortfall that carries a consequence.
Aggregating, and where you cannot
Someone with several IRAs must calculate the required amount separately for each, but may then withdraw the total from one account or spread it across several. The per-account arithmetic still has to be done; only the withdrawal is flexible.
Workplace plans work differently. The IRS states that distributions required from plans such as 401(k)s and 457(b)s must be taken separately from each plan. Someone with accounts left at three former employers has three separate obligations, and it is the forgotten account from two jobs ago that tends to go unwithdrawn.
There is also a delay available to people still working: participants in a workplace plan can postpone distributions until the year they retire, unless they own 5 percent or more of the business sponsoring it. This applies to that employer's plan, not to an IRA.
The penalty, and the charitable route
Missing a distribution carries an excise tax of 25 percent of the amount not withdrawn, reduced to 10 percent if the shortfall is corrected within two years. Read the base carefully. The charge is a share of the money that stayed in the account, not a surcharge on tax that would have been due, so it is a large number relative to the mistake.
One alternative exists for people who give to charity anyway. From age 70½, an IRA owner can direct money from the account straight to a qualified charity, and the IRS confirms that such a qualified charitable distribution can satisfy all or part of the required minimum distribution. The distribution is excluded from taxable income rather than deducted, which is worth more to someone taking the standard deduction than a normal gift would be. There is an annual cap, and it is indexed, so the current figure is worth checking against the IRS before relying on it.
Note the age gap. Qualified charitable distributions become available at 70½, two and a half years before distributions become mandatory.
This is an explanation of the rules, not tax advice. Where several accounts, a working spouse, an inherited account or a large single-year balance are involved, the rules interact in ways a general description cannot settle.
