IRA RMDs: Roth vs Traditional

For decades, you've diligently saved in your IRA, watching your balance grow through consistent contributions and investment returns. But once you reach a certain age, the IRS has other plans. Required Minimum Distributions—RMDs—force you to withdraw a minimum amount from your traditional IRA each year, whether you need the money or not. Miss an RMD or withdraw too little, and you'll face one of the harshest penalties in the tax code: up to 25% of the amount you should have withdrawn.

RMDs are one of the most significant differences between traditional and Roth IRAs, yet many people don't understand how they work until they're approaching the RMD age. These mandatory withdrawals can disrupt your retirement tax planning, push you into higher tax brackets, trigger increased Medicare premiums, cause more of your Social Security to be taxed, and limit your ability to control when and how you use your retirement savings. For those with substantial traditional IRA balances, RMDs can create unexpectedly large tax bills that last throughout retirement.

This comprehensive guide explains everything you need to know about IRA Required Minimum Distributions. We'll cover when RMDs begin, how they're calculated, the dramatic differences between traditional and Roth IRA RMD rules, the penalties for non-compliance, and strategic approaches to minimize their impact. Whether you're decades from RMD age or staring down your first distribution, understanding these rules will help you make better decisions about your retirement accounts and potentially save thousands in taxes.

What Are Required Minimum Distributions (RMDs)?

Required Minimum Distributions are exactly what they sound like: the minimum amount you must withdraw from certain retirement accounts once you reach a specific age. The IRS mandates these withdrawals to ensure they eventually collect taxes on the money that's been growing tax-deferred in your traditional IRA, 401(k), and similar accounts.

Why RMDs Exist

Traditional IRAs and 401(k)s give you a valuable tax benefit: you either deduct contributions or contribute pre-tax dollars, and your investments grow without annual taxation. But the IRS won't let this go on forever. Eventually, they want their share.

Without RMDs, you could let your traditional IRA grow tax-deferred your entire life, then pass it to your heirs, indefinitely deferring the tax bill. RMDs ensure the government collects taxes on this money during your lifetime.

Which Accounts Have RMDs?

Accounts subject to RMDs:

  • Traditional IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • Traditional 401(k)s
  • Traditional 403(b)s
  • 457(b) plans
  • Inherited IRAs (with special rules)

Accounts NOT subject to RMDs during your lifetime:

  • Roth IRAs (the big exception—covered in detail below)
  • Roth 401(k)s (but they do have RMDs unless rolled to a Roth IRA)

When Do RMDs Begin?

The age when RMDs begin has changed several times in recent years due to new legislation.

Current RMD Age: 73 (For Most People)

Under the SECURE 2.0 Act passed in 2022, the RMD age depends on your birth year:

  • Born before July 1, 1949: RMDs began at age 70½
  • Born July 1, 1949 through 1950: RMDs begin at age 72
  • Born 1951 through 1959: RMDs begin at age 73
  • Born 1960 or later: RMDs begin at age 75

This means if you were born in 1955, you'll take your first RMD in the year you turn 73. If you were born in 1965, you won't take your first RMD until you turn 75.

Your First RMD: Special Timing Rule

For your first RMD only, you have until April 1 of the year following the year you turn your RMD age. This is called your "required beginning date."

Example: Maria turns 73 in 2024. She must take her first RMD by April 1, 2025. She must take her second RMD by December 31, 2025.

Notice that if Maria delays her first RMD until 2025, she'll take two RMDs in 2025 (the delayed 2024 RMD and the 2025 RMD). This creates a larger tax bill in a single year, which is why many people choose to take their first RMD in the year they turn 73 rather than waiting until April 1 of the following year.

Every Subsequent RMD: December 31 Deadline

After your first RMD, you must take each year's distribution by December 31. There's no flexibility—miss this deadline and you'll face penalties.

Traditional IRA RMDs: The Rules

Traditional IRAs have mandatory RMDs that begin at your RMD age and continue every year for the rest of your life.

How RMDs Are Calculated

Your annual RMD is calculated using a simple formula:

Prior year-end IRA balance ÷ Life expectancy factor = RMD amount

The life expectancy factor comes from IRS tables. Most people use the Uniform Lifetime Table, which provides a divisor based on your age. The IRS updates these tables periodically; the most recent update was in 2022, which generally resulted in smaller RMDs because life expectancies increased.

Example RMD Calculation

Scenario: John turns 73 in 2024. His traditional IRA balance on December 31, 2023, was $500,000.

Using the Uniform Lifetime Table:

  • Age 73 life expectancy factor: 26.5
  • Calculation: $500,000 ÷ 26.5 = $18,868
  • John must withdraw at least $18,868 in 2024

Each year, the divisor gets smaller (because your life expectancy decreases as you age), which means your RMD gets larger as a percentage of your account, even if your balance stays the same.

Key RMD Calculation Points

  • Use the prior year-end balance: For your 2024 RMD, use your December 31, 2023 balance
  • Calculate separately for each IRA: If you have multiple traditional IRAs, calculate the RMD for each based on its individual balance
  • Aggregate withdrawals: After calculating each account's RMD, you can add them up and withdraw the total from any one IRA or combination of IRAs. You don't have to withdraw from each account proportionally
  • Don't include Roth IRAs: Roth IRAs don't have RMDs and aren't included in the calculation

Most Custodians Calculate for You

The good news is you rarely need to calculate RMDs manually. Your IRA custodian will send you a notice each year (typically in January) stating your RMD amount for that year. They've already done the math based on your prior year-end balance and your age.

However, you're ultimately responsible for taking the correct amount. If your custodian makes an error, you're still liable for penalties, so it's worth understanding the calculation.

Roth IRA RMDs: The Game-Changing Exception

Here's where Roth IRAs dramatically differ from traditional IRAs: Roth IRAs have no RMDs during your lifetime.

This single difference makes Roth IRAs extraordinarily valuable for retirement planning and estate planning.

What "No RMDs" Means in Practice

With a Roth IRA, you are never forced to withdraw money. Your account can continue growing tax-free for your entire life. You can withdraw as much or as little as you want, whenever you want, with no penalties (assuming you meet the age 59½ and five-year requirements for qualified distributions).

This provides several advantages:

Control Over Your Taxable Income

Without mandatory withdrawals, you control your income level in retirement. This allows you to strategically manage your tax bracket, potentially staying below thresholds that trigger:

  • Higher income tax brackets
  • Increased Medicare Part B and D premiums (IRMAA surcharges)
  • Taxation of Social Security benefits
  • Net Investment Income Tax (3.8% surtax on investment income for high earners)
  • Reduced eligibility for various tax credits and deductions

Continued Tax-Free Growth

Money remaining in your Roth IRA continues growing tax-free. If you don't need to withdraw funds, they can compound for additional years or decades, creating more wealth for you or your heirs.

Emergency Fund

A Roth IRA effectively serves as an emergency fund in retirement. You can leave the money untouched unless you genuinely need it, rather than being forced to withdraw and pay taxes on money you don't need.

Estate Planning Benefits

Because you're not forced to deplete your Roth IRA through RMDs, you can potentially leave a larger, more valuable account to your heirs. They'll inherit it tax-free (though they'll face distribution requirements—more on this below).

Roth 401(k)s: The Exception to the Exception

While Roth IRAs have no RMDs, Roth 401(k)s do have RMDs during your lifetime (at the same age as traditional accounts). However, you can avoid this by rolling your Roth 401(k) into a Roth IRA before your RMD age. Once in a Roth IRA, the RMD requirement disappears.

This rollover strategy is common for retirees who want to maintain the no-RMD advantage of Roth accounts.

The Tax Impact of RMDs

RMDs from traditional IRAs create taxable income. This has several cascading effects beyond just the immediate tax bill.

Direct Tax on RMD Amount

The entire RMD amount is taxed as ordinary income at your marginal tax rate. If you withdraw $25,000 and you're in the 22% bracket, you'll owe $5,500 in federal income tax, plus any state income tax.

Pushing You Into Higher Tax Brackets

Large RMDs can push you into higher tax brackets. Consider someone with $30,000 in Social Security and pension income who's comfortably in the 12% bracket. Add a $40,000 RMD, and they might jump to the 22% or even 24% bracket.

Making Social Security Taxable

Up to 85% of your Social Security benefits can be taxable, depending on your "combined income" (AGI + non-taxable interest + half of Social Security). RMDs increase your AGI, potentially causing more of your Social Security to be taxed.

Medicare Premium Surcharges (IRMAA)

Higher-income Medicare beneficiaries pay Income-Related Monthly Adjustment Amounts—surcharges on Medicare Part B and Part D premiums. The 2024 IRMAA thresholds start at $103,000 (single) or $206,000 (married filing jointly).

Large RMDs can push you over these thresholds, adding hundreds or thousands of dollars to your annual Medicare costs. IRMAA is based on income from two years prior, so a large RMD in 2024 affects your 2026 Medicare premiums.

Investment Income Surtax

The Net Investment Income Tax (NIIT) is a 3.8% surtax on investment income for taxpayers with MAGI above $200,000 (single) or $250,000 (married filing jointly). While RMDs themselves aren't investment income subject to NIIT, they increase your MAGI, potentially subjecting more of your investment income to the surtax.

Penalties for Missing or Underpaying RMDs

The IRS takes RMDs seriously. Miss your RMD or withdraw less than required, and you'll face one of the stiffest penalties in the tax code.

The Penalty: 25% Excise Tax

Under SECURE 2.0, the penalty for failing to take an RMD is 25% of the amount you should have withdrawn but didn't. Previously, it was 50%, so the penalty has been reduced but is still severe.

Example: Your RMD was $20,000, but you only withdrew $12,000. You're short by $8,000. Your penalty: $2,000 (25% × $8,000).

If you correct the shortfall promptly (within a correction window), the penalty can be reduced to 10%.

You Still Owe the Tax

The 25% penalty is in addition to the regular income tax you owe on the RMD. In the example above, you'd also owe income tax on the $8,000 you should have withdrawn (when you eventually withdraw it).

How to Correct Missed RMDs

If you realize you missed an RMD:

  1. Withdraw the full amount immediately: Take the RMD you missed as soon as you discover the error
  2. File Form 5329: Report the missed RMD and calculate the penalty
  3. Request a waiver: You can request the IRS waive the penalty if you have reasonable cause (you acted diligently to correct it once discovered). Include an explanation letter with Form 5329
  4. Keep documentation: Save proof that you withdrew the missed amount and took corrective action

The IRS often grants penalty waivers for first-time mistakes if you correct them promptly and show reasonable cause.

RMD Strategies to Minimize Impact

While you can't avoid traditional IRA RMDs entirely, you can minimize their impact through strategic planning.

Strategy 1: Start Roth Conversions Before RMDs Begin

Convert traditional IRA funds to Roth IRA funds in the years before your RMD age. You'll pay tax on the converted amounts, but you accomplish several things:

  • Reduce your traditional IRA balance, which reduces future RMDs
  • Move money into a Roth IRA with no lifetime RMDs
  • Potentially pay taxes at a lower rate if you're in early retirement with low income
  • Create tax-free income for later in retirement

Many retirees convert portions of their traditional IRAs in their early 60s or early 70s (before age 73), strategically managing their tax liability while reducing future RMD obligations.

Strategy 2: Qualified Charitable Distributions (QCDs)

Once you're 70½ or older, you can make Qualified Charitable Distributions directly from your IRA to charity. QCDs count toward satisfying your RMD but aren't included in your taxable income.

For 2024, you can donate up to $105,000 per year through QCDs ($210,000 per couple if both have IRAs). This strategy is powerful if:

  • You're charitably inclined
  • You don't need your full RMD for living expenses
  • You want to reduce your taxable income
  • You take the standard deduction (so you wouldn't benefit from itemizing charitable deductions)

Example: Your RMD is $30,000, but you only need $20,000 for expenses. You donate $10,000 to charity via QCD. You satisfy your full $30,000 RMD requirement, but only $20,000 is taxable income. The $10,000 QCD isn't included in your AGI, reducing your tax bill and avoiding increases in Medicare premiums or Social Security taxation.

Strategy 3: Delay Your First RMD (Carefully)

You can delay your first RMD until April 1 of the year following the year you reach RMD age. This might be beneficial if you expect to be in a lower tax bracket the following year (perhaps you're retiring mid-year).

However, remember that delaying means taking two RMDs in one year, which could push you into a higher bracket. Run the numbers both ways before deciding.

Strategy 4: Strategic Withdrawal Planning

Coordinate RMDs with other income sources to minimize total tax impact:

  • Withdraw from taxable accounts in low-income years to fill lower tax brackets
  • Use Roth IRA withdrawals (tax-free) to supplement income without increasing taxes
  • Time large expenses (home repairs, travel, medical procedures) in years with large RMDs to create offsetting deductions
  • Consider bunching deductions in high-RMD years if you're close to itemizing

Strategy 5: Take More Than the Minimum

You're not limited to taking only the RMD amount. Taking more than required in lower-tax years can:

  • Reduce future account balances and future RMDs
  • Provide funds for major expenses
  • Help you fill a lower tax bracket before Social Security begins or increases

Strategy 6: Consider Your State Tax Situation

If you're considering relocating in retirement, moving to a state with no income tax (like Florida, Texas, or Nevada) before RMDs begin can save significantly on taxes over your lifetime.

Inherited IRAs and RMDs

When you inherit an IRA, different RMD rules apply depending on your relationship to the deceased and when they died.

Spousal Beneficiaries

Surviving spouses have the most flexibility:

  • Treat the IRA as your own: Roll it into your IRA or treat it as your own. RMDs then follow the normal rules based on your age
  • Remain a beneficiary: Keep it as an inherited IRA. This allows penalty-free withdrawals before 59½ but requires RMDs based on your life expectancy

Most surviving spouses choose to treat the inherited IRA as their own, delaying RMDs until they reach RMD age.

Non-Spousal Beneficiaries (Post-SECURE Act)

The SECURE Act of 2019 dramatically changed rules for non-spouse beneficiaries. Most must now withdraw the entire inherited IRA within 10 years of the original owner's death (the "10-year rule"). There are no annual RMDs within those 10 years, but the account must be emptied by December 31 of the 10th year.

Exceptions—Eligible Designated Beneficiaries: The following can still use life-expectancy-based distributions:

  • Surviving spouses
  • Minor children of the deceased (until they reach majority, then the 10-year rule applies)
  • Disabled individuals
  • Chronically ill individuals
  • Individuals not more than 10 years younger than the deceased

Inherited Roth IRAs

Inherited Roth IRAs also have distribution requirements for beneficiaries (unlike the original owner's Roth IRA). Non-spouse beneficiaries must withdraw the entire account within 10 years, though distributions remain tax-free.

Spousal beneficiaries can treat an inherited Roth IRA as their own, eliminating the 10-year requirement and lifetime RMDs entirely.

Common RMD Mistakes to Avoid

Mistake 1: Forgetting About All Your Accounts

You must take RMDs from each traditional IRA, 401(k), 403(b), and other account you own. People with multiple accounts sometimes forget about old 401(k)s or small IRAs, missing RMDs and incurring penalties.

Create a master list of all your retirement accounts and set calendar reminders for RMD deadlines.

Mistake 2: Miscalculating When You Have Multiple IRAs

With multiple IRAs, you must calculate the RMD for each account separately but can withdraw the total from any combination of IRAs. People sometimes only take RMDs from one account without calculating what's required from the others.

Mistake 3: Not Taking Your First RMD on Time

Remember, your first RMD must be taken by April 1 of the year following the year you reach RMD age. Many people mistakenly think they have until December 31 of that following year.

Mistake 4: Taking RMDs From the Wrong Account Type

RMDs from 401(k)s must come from each specific 401(k). You can't aggregate 401(k) RMDs the way you can with IRAs. Similarly, 403(b) RMDs are calculated and withdrawn separately from IRAs and 401(k)s.

Mistake 5: Ignoring RMDs Because You Don't Need the Money

"I don't need the money" is not a valid reason to skip an RMD. The penalty is severe. If you don't need the money, consider taking the RMD and reinvesting it in a taxable account, using QCDs to donate to charity, or gifting it to family members.

Mistake 6: Not Planning for the Tax Bill

RMDs are fully taxable. Don't spend the entire distribution without setting aside money for taxes. Consider having taxes withheld directly from the RMD (your custodian can do this) or making estimated tax payments to avoid underpayment penalties.

The Bottom Line: Why RMD Rules Favor Roth IRAs

The stark difference in RMD treatment is one of the most compelling reasons to favor Roth IRAs, especially as you approach retirement age:

Traditional IRAs:

  • Mandatory RMDs starting at age 73 (or 75 for those born in 1960+)
  • RMDs increase your taxable income whether you need the money or not
  • Can push you into higher tax brackets
  • Can trigger Medicare premium surcharges
  • Force you to deplete your account over time
  • Create ongoing tax planning complexity

Roth IRAs:

  • No RMDs during your lifetime
  • Complete control over withdrawal timing and amounts
  • Continued tax-free growth for your entire life
  • Better for estate planning (larger potential inheritance)
  • Withdrawals don't affect tax bracket, Medicare premiums, or Social Security taxation
  • Simpler retirement planning

This difference becomes especially significant if you have multiple income sources in retirement (pension, Social Security, investment income) and don't need to draw heavily from retirement accounts. Traditional IRA owners must take RMDs anyway, paying taxes on money they don't need. Roth IRA owners can leave the money growing tax-free.

Planning Ahead: Actions to Take Now

Regardless of your current age, you can take steps now to manage future RMD impact:

If You're 20+ Years From RMD Age:

  • Prioritize Roth contributions to avoid RMDs entirely
  • Build a mix of pre-tax and after-tax retirement accounts for tax diversification
  • Understand how account type decisions today affect your retirement tax picture

If You're 10-20 Years From RMD Age:

  • Model your expected RMDs based on projected account balances
  • Consider beginning Roth conversions to reduce traditional IRA balances
  • Consolidate retirement accounts for easier RMD management
  • Review beneficiary designations

If You're Within 10 Years of RMD Age:

  • Aggressively consider Roth conversions in low-income years
  • Project your first several years of RMDs to understand tax impact
  • Coordinate with a financial advisor or tax professional on RMD minimization strategies
  • Set up systems to track RMDs across all accounts
  • Consider QCD strategies if you're charitably inclined

If You're Already Taking RMDs:

  • Set calendar reminders for December 31 deadline
  • Consider QCDs to reduce taxable income
  • Review withholding to ensure adequate tax payments
  • Continue Roth conversions on amounts above RMD if it makes sense
  • Monitor how RMDs affect Medicare premiums and adjust strategy if needed

Conclusion

Required Minimum Distributions represent one of the most significant differences between traditional and Roth IRAs. While traditional IRAs provide valuable upfront tax deductions, they come with the long-term cost of mandatory distributions that can create tax planning challenges throughout retirement. Roth IRAs sacrifice the upfront deduction but provide unparalleled flexibility by eliminating lifetime RMDs entirely.

Understanding RMD rules allows you to make better decisions about retirement account types, contribution strategies, and conversion timing. Whether you're just starting to save for retirement or already managing RMDs, proactive planning can minimize the tax impact and maximize the wealth you retain and potentially pass to your heirs.

The key is to start planning early. By the time you reach RMD age, your options for minimizing impact are limited. But if you're strategic about account type selection, Roth conversions, and withdrawal sequencing in the years and decades before RMDs begin, you can dramatically reduce their burden and keep more of your hard-earned retirement savings working for you.