Understanding Your Mandatory Retirement Account Withdrawals: A Complete Guide to RMD Planning

Retirement accounts offer substantial tax advantages, but the IRS ultimately expects you to withdraw your funds. Once you reach a certain age, you’re no longer in control—the government mandates that you must begin drawing from most tax-deferred retirement accounts. This mandatory withdrawal is known as a Required Minimum Distribution, or RMD.

What Changed With SECURE 2.0 and Why It Matters

The rules around when you must start withdrawals have shifted recently. Previously, the age threshold was 70.5, then it moved to 72 in 2020. However, the SECURE 2.0 Act updated this again: if you turn 72 in 2023 or later, your new trigger age is 73. This means your first withdrawal deadline becomes April 1 of the year after you turn 73 (or 72 if that’s your milestone age). After that initial year, all subsequent distributions must be completed by December 31 annually.

Understanding these deadlines is critical because the penalty for non-compliance is steep—the IRS imposes a 50% tax on whatever amount you failed to withdraw.

Which Retirement Accounts Require These Withdrawals?

Not all retirement savings are treated equally. The following accounts mandate distributions:

• Traditional IRAs and SEP IRAs
• SIMPLE IRAs and Rollover IRAs
• Most 401(k) and 403(b) plans
• Small business retirement accounts
• Inherited IRAs (even from non-spouse beneficiaries)

Notably absent from this list: Roth IRAs. Since you fund these accounts with after-tax dollars, the IRS allows your money to grow indefinitely without mandatory withdrawals during your lifetime.

The Mechanics Behind the Numbers

Your withdrawal amount isn’t arbitrary—it’s determined by a formula combining your account balance and IRS life expectancy tables. Here’s how the inherited rmd calculator methodology works:

Step One: Locate your current age on the IRS Uniform Lifetime Table (maintained in IRS Publication 590).

Step Two: Identify the corresponding “distribution period” factor for your age. At age 78, this factor is 22.0. At age 85, it drops to 16.0. These factors decrease as you age, meaning your required distributions increase proportionally.

Step Three: Take your retirement account balance as of December 31 of the previous year and divide it by your life expectancy factor.

Example calculation: You turned 78 and your IRA balance stood at $100,000 on December 31 last year. Dividing $100,000 by 22.0 yields $4,545.45—your RMD for that year.

The IRS Uniform Lifetime Table Reference

The table spans from age 72 through 120+, with distribution periods ranging from 27.4 years at age 72 down to 2.0 years for those 120 and older. This declining factor structure reflects IRS mortality assumptions and automatically increases your withdrawal percentage each year.

If your spouse is your sole beneficiary and is more than 10 years younger than you, special rules apply: you’d use the IRS Joint Life and Last Survivor Expectancy Table instead, which extends the distribution period and reduces annual withdrawal amounts.

Multiple Accounts: Flexibility in How You Withdraw

When you own several retirement plans—a 401(k) from a current employer, a traditional IRA from a previous job, perhaps an old SEP IRA—you must calculate an RMD for each one separately. However, you gain flexibility in execution.

You can either:

• Withdraw from each account individually
• Total all your RMDs and take the combined amount from just one account
• Take distributions from any combination of your accounts

Strategic account selection matters if you’re trying to minimize taxes or manage your portfolio. For instance, you might prefer liquidating underperforming investments first or drawing down high-fee accounts before others.

Exceptions and Timing Strategies

The standard deadline is December 31 each year, but the first distribution gets special treatment. In your initial RMD year, you can delay taking the withdrawal until April 1 of the following year. However, this creates a timing trap: you’d then owe two distributions in that second calendar year (the first year’s late distribution plus that year’s regular distribution), potentially pushing you into a higher tax bracket.

Another exception exists for those still employed: if you’re still working at the company sponsoring your 401(k) or another employer plan, and you don’t own 5% or more of the company, you can postpone your first RMD until after retirement. Once you separate from service, however, the clock starts immediately.

Inherited IRAs: Different Rules for Different Heirs

Inheritance transforms the RMD landscape significantly, with rules depending on your relationship to the deceased account holder.

When a Spouse Inherits

Spouses receive privileges others don’t. You can roll inherited IRA assets into your own account, then use the standard Uniform Lifetime Table to calculate RMDs after reaching your trigger age (72 or 73). You also gain penalty-free withdrawal access after age 59.5, a benefit exclusive to spousal rollovers.

Alternatively, you can keep the inherited IRA separate. In that case, timing depends on your spouse’s age at death: if they’d already reached 72 (or 73 if applicable), you must begin distributions by December 31 the following year. If they hadn’t yet reached that age, you can delay RMDs until your spouse would have turned 72 or 73.

When a Non-Spouse Inherits

The SECURE Act fundamentally changed non-spouse inheritance. The old “stretch IRA” option—which allowed inheritors to spread distributions over their lifetimes—largely disappeared. Current rules require non-spouse beneficiaries to drain the entire inherited account within 10 years of the original owner’s death.

However, this 10-year rule doesn’t apply to:

• Minors (who get 10 years after reaching adulthood)
• Disabled individuals
• Chronically ill individuals
• Beneficiaries no more than 10 years younger than the original owner

For those who do qualify for the old rules, you’d start taking RMDs by December 31 following the owner’s death, using the IRS Single Life Expectancy Table based on your age.

When an Entity Inherits

If the beneficiary is a trust, charity, or organization rather than an individual, RMD calculations depend on whether the original owner had already begun taking distributions. If they had, the entity uses the owner’s Single Life Expectancy Table factor. If not, the entity must liquidate the entire balance within five years. Look-Through Trusts have special provisions, requiring professional guidance.

Inherited Roth IRAs: A Different Story

Roth IRAs generally escape RMD requirements during the owner’s lifetime. But inheritance changes that. A surviving spouse can treat an inherited Roth as their own (avoiding RMDs), while non-spouse beneficiaries must follow the 10-year payout rule. After five years of account ownership, distributions remain tax-free.

Inherited 401(k)s: Plan Rules Apply

401(k) inheritance depends partly on plan administrator policies. Spouses can typically leave the account as-is or roll it into an inherited IRA (then following spousal RMD rules). Non-spouse beneficiaries rolling over to inherited IRAs follow non-spouse RMD guidelines.

Some plans impose additional restrictions—requiring lump-sum distributions or five-year payouts—so contacting your plan administrator is essential. State inheritance laws may also influence how these accounts are treated.

Avoiding RMDs Entirely: The Roth Conversion Strategy

While missing your RMD triggers a punitive 50% tax on the shortfall, one legal escape hatch exists: converting your traditional IRA or 401(k) to a Roth IRA or Roth 401(k). You’ll face a larger tax bill that year, but subsequent growth remains untouched by RMD requirements. Theoretically, you could hold Roth assets until death, passing tax-free wealth to heirs—subject to the 10-year rule for non-spouse inheritors.

Tax-free and penalty-free distributions from Roths are available after age 59.5 (assuming five years of account ownership), and you can always withdraw your own contributions whenever you wish, completely tax and penalty-free.

The Penalty for Getting It Wrong

Failing to withdraw your full RMD by the deadline results in a 50% excise tax on the shortfall. You don’t need to take the full amount in one lump sum; you can distribute it incrementally throughout the year. Just ensure the total reaches your calculated RMD amount before year-end. In rare circumstances, the IRS may waive this penalty if you can demonstrate reasonable cause and correct the error promptly.

Bottom Line

Your obligation to withdraw from most retirement accounts begins at age 72 (or 73 under SECURE 2.0). The amount depends on your account balance and life expectancy factors published by the IRS. While calculating your RMD is straightforward—find your age on the table, grab your account balance, divide, and withdraw—the complexity multiplies with multiple accounts, spousal situations, and especially inherited IRAs.

Getting professional guidance from a tax advisor or financial professional who understands retirement income planning helps you navigate deadlines, minimize tax impact, and avoid costly penalties. Given the stakes involved and the potential for tax optimization through strategic timing and account selection, expert advice typically pays for itself many times over.