Required Minimum Distributions: What You Need to Know Before Age 73

If you’ve spent decades diligently saving in a traditional IRA or 401(k), you may be surprised to learn the IRS eventually requires you to start taking money out — whether you need it or not. These mandatory withdrawals are called Required Minimum Distributions, or RMDs, and for most people, they begin at age 73.

Understanding how RMDs work — and planning for them before they arrive — can mean the difference between a manageable tax situation in retirement and a costly surprise.

What Is a Required Minimum Distribution?

A Required Minimum Distribution is the minimum amount the IRS requires you to withdraw each year from certain tax-deferred retirement accounts. When you contributed to a traditional IRA, 401(k), 403(b), or similar account, you received a tax deduction upfront. The government deferred that tax — but it didn’t forgive it. RMDs are the IRS’s mechanism for ensuring that deferred income eventually gets taxed.

Each RMD you take is added to your taxable income for that year, which can affect your tax bracket, Medicare premiums, and even how much of your Social Security benefit is taxable.

When Do RMDs Begin?

Thanks to the SECURE 2.0 Act, the RMD starting age increased to 73 for anyone who turns 73 on or after January 1, 2023. If you were born in 1960 or later, your RMD age will be 75. This was a meaningful change that gives savers a few additional years of tax-deferred growth.

Your first RMD must be taken by April 1 of the year following the year you turn 73. Every subsequent RMD must be taken by December 31 of that calendar year. This means if you delay your first RMD to April 1, you’ll effectively take two RMDs in that same tax year — which could push you into a higher bracket.

For most people, it makes sense to take the first RMD in the year you turn 73 rather than delaying it.

Which Accounts Are Subject to RMDs?

RMDs apply to:

Traditional IRAs, SEP IRAs, and SIMPLE IRAs. 401(k), 403(b), and 457(b) plans from former employers. Inherited IRAs and inherited Roth 401(k)s (with specific rules depending on when you inherited the account and your relationship to the original owner).

Roth IRAs are a notable exception — they are not subject to RMDs during the original owner’s lifetime, which is one reason Roth conversions can be a powerful planning tool in the years leading up to age 73.

If you’re still working at 73 and actively participating in your current employer’s retirement plan, you may be able to delay RMDs from that specific plan until you retire, provided your plan allows it. This exception does not apply to IRAs.

How Is the RMD Amount Calculated?

Your RMD is calculated by dividing the prior December 31 account balance by a life expectancy factor from IRS Uniform Lifetime Tables. The factor decreases each year, meaning your required percentage generally increases as you age.

For example, at age 73 the Uniform Lifetime factor is 26.5. If your IRA balance on December 31 of the prior year was $500,000, your RMD would be approximately $18,868. At age 80, that same $500,000 balance would produce an RMD of roughly $24,390 using the factor of 20.5.

If your sole beneficiary is a spouse who is more than 10 years younger than you, a different — more favorable — table applies, which lowers the required distribution amount each year.

It’s also important to note: if you have multiple traditional IRAs, you must calculate the RMD for each account separately, but you can aggregate and take the total from one or any combination of those IRAs. 401(k) plans do not allow this aggregation — each plan requires its own separate distribution.

What Happens If You Miss an RMD?

Prior to SECURE 2.0, missing an RMD carried a stiff 50% excise tax on the amount not taken. That penalty has been reduced to 25% — and further reduced to 10% if corrected within two years through the IRS correction program. While this is a meaningful improvement, the penalty is still significant. Missing an RMD is an expensive mistake that’s worth taking seriously.

Tax Planning Strategies Before Age 73

The years between retirement and age 73 can be a valuable window for proactive tax planning. During this period, your income may be lower than it was during your working years — and lower than it will be once RMDs begin. This creates an opportunity to:

Consider Roth conversions. Converting a portion of your traditional IRA to a Roth IRA during lower-income years can reduce the balance subject to future RMDs and shift assets into a tax-free environment. A qualified financial advisor can help you model the right conversion amount each year without unnecessarily triggering higher brackets or Medicare surcharges.

Manage your overall tax bracket intentionally. By taking strategic distributions from your IRA before RMDs are required, you can “smooth out” your taxable income over time rather than facing larger forced distributions later.

Review your Social Security timing. RMDs stack on top of Social Security income and can increase the percentage of your benefit that’s taxable. Coordinating when you claim Social Security with when RMDs begin is an important planning consideration.

Evaluate qualified charitable distributions. If you are charitably inclined and are 70½ or older, you may be able to make a Qualified Charitable Distribution (QCD) directly from your IRA to a qualified charity — up to $105,000 per year in 2024. A QCD counts toward your RMD but is excluded from your taxable income, making it one of the most tax-efficient charitable giving strategies available to retirees.

A Note on Inherited IRAs

The rules governing inherited IRAs were significantly changed by the original SECURE Act in 2020 and have continued to evolve. In most cases, non-spouse beneficiaries who inherit an IRA are now required to fully distribute the account within 10 years. If you’ve recently inherited a retirement account — or expect to — it’s important to understand the rules that apply to your specific situation and the potential tax impact of how and when you take those distributions.

RMDs Are a Planning Opportunity, Not Just a Compliance Requirement

For many pre-retirees and retirees, RMDs feel like an unwelcome intrusion — being told when and how much you must take from your own money. But with advance planning, RMDs can be managed in a way that minimizes tax drag, supports your income needs, and aligns with your broader retirement and estate goals.

The key is starting the conversation before age 73, not after.

At Patten Financial Group, we help pre-retirees in Valparaiso and throughout Northwest Indiana and the Greater Chicagoland area develop a personalized retirement income plan that addresses RMDs, Social Security timing, tax efficiency, and more. As a fiduciary advisor, we are committed to acting in your best interest.

If you’re approaching retirement and want to understand how RMDs fit into your overall income strategy, we invite you to schedule a complimentary retirement income review today.

[This article is for educational purposes only and does not constitute tax or legal advice. Please consult a qualified tax professional regarding your specific situation.]

Investment advisory services offered through Redhawk Wealth Advisors, Inc., an SEC

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