IRA Required Minimum Distribution: Start Age, Calculations, and More
A Required Minimum Distribution (RMD) is the minimum amount of money you must withdraw annually from certain retirement accounts, starting at a specific age determined by IRS regulations. The purpose of RMDs is twofold: first, they ensure that you utilize your retirement savings during your lifetime rather than indefinitely deferring taxes; second, they provide the government with tax revenue from these distributions.
Tax-deferred retirement accounts are subject to RMDs. Examples are
- Traditional TSP
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- Traditional 401(k)s
- 403(b)s
- 457(b)s
* Roth IRAs, Roth TSP, and 401ks are tax exempted.
The IRS calculates the RMD by dividing the prior year-end balance of your individual retirement account by a life expectancy factor derived from the IRS Uniform Lifetime Table, which takes into account your age. This calculation is done for each applicable account separately, ensuring that you withdraw the appropriate amount from each. Failing to take your RMDs on time can result in substantial penalties, so it’s crucial to understand and comply with these regulations.
Knowledge is Confidence!
When do You Need to Start Taking Your IRA Required Minimum Distribution?
What is the age for RMDs in 2024? Detail Chart
| New RMD Ages in 2024 | |
|---|---|
| Birth Year | RMD Start Age |
| Born Before July 1, 1949 | 70 1/2 |
| Born July 1, 1949 - December 31, 1950 | 72 |
| Born January 1, 1951 ~ December 31, 1959 | 73 |
| Born After January 1, 1960 | 75 |
When should you take your first required minimum distribution?
If it’s your first time taking your RMD, you can take it any time that year. The IRS has a grace period up to April 1st of the following up for the first RMD. For example:
Your birthday is July 2, 1951, and you turn 73 in 2024. You can complete the withdrawal anytime in 2024 to satisfy the requirement. You could delay taking your 2024 RMD until April 1, 2025. Note, if you delay until 2025, you will need to take two distributions that year (the 2024 RMD before April 1, and the 2025 RMD).
How to Calculate Your RMD?
To calculate your Required Minimum Distribution (RMD), you’ll need your retirement account’s prior year-end balance (as of December 31) and your current age. Refer to the IRS Uniform Lifetime Table, which provides a life expectancy factor corresponding to your age. Divide your account balance by this life expectancy factor to determine your RMD for the current year. Remember that this calculation applies to each eligible qualified retirement plan separately.
Using the IRS Uniform Lifetime Table
| Uniform Lifetime Table | |||||
|---|---|---|---|---|---|
| Age | Expectancy Factor | % | Age | Expectancy Factor | % |
| 72 | 27.4 | 3.65% | 97 | 7.8 | 12.82% |
| 73 | 26.5 | 3.77% | 98 | 7.3 | 13.70% |
| 74 | 25.5 | 3.92% | 99 | 6.8 | 14.71% |
| 75 | 24.6 | 4.07% | 100 | 6.4 | 15.63% |
| 76 | 23.7 | 4.22% | 101 | 6.0 | 16.67% |
| 77 | 22.9 | 4.37% | 102 | 5.6 | 17.86% |
| 78 | 22.0 | 4.55% | 103 | 5.2 | 19.23% |
| 79 | 21.1 | 4.74% | 104 | 4.9 | 20.41% |
| 80 | 20.2 | 4.95% | 105 | 4.6 | 21.74% |
| 81 | 19.4 | 5.15% | 106 | 4.3 | 23.26% |
| 82 | 18.5 | 5.41% | 107 | 4.1 | 24.39% |
| 83 | 17.7 | 5.65% | 108 | 3.9 | 25.64% |
| 84 | 16.8 | 5.95% | 109 | 3.7 | 27.03% |
| 85 | 16.0 | 6.25% | 110 | 3.5 | 28.57% |
| 86 | 15.2 | 6.58% | 111 | 3.4 | 29.41% |
| 87 | 14.4 | 6.94% | 112 | 3.3 | 30.30% |
| 88 | 13.7 | 7.30% | 113 | 3.1 | 32.26% |
| 89 | 12.9 | 7.75% | 114 | 3.0 | 33.33% |
| 90 | 12.2 | 8.20% | 115 | 2.9 | 34.48% |
| 91 | 11.5 | 8.70% | 116 | 2.8 | 35.71% |
| 92 | 10.8 | 9.26% | 117 | 2.7 | 37.04% |
| 93 | 10.1 | 9.90% | 118 | 2.5 | 40.00% |
| 94 | 9.5 | 10.53% | 119 | 2.3 | 43.48% |
| 95 | 8.9 | 11.24% | 120 + | 2.0 | 50.00% |
| 96 | 8.4 | 11.90% | |||
Steps to calculate the RMD amount: Example
Let’s continue from the above example. If you are age 73, then the life expectancy factor above is 26.5. Assuming that you have $400,000 in a Traditional TSP, then your RMD for 2024 will be:
$400,000 / 26.5 = $15,094.34
Consult your tax professional or financial advisor for assistance if necessary
Taxation of Required Minimum Distributions
Required Minimum Distributions (RMDs) are generally considered taxable income in the year they are withdrawn. This means that they are added to your other income for the year and taxed at your ordinary income tax rate. This tax treatment applies because RMDs are typically taken from tax-deferred accounts where contributions were made with pre-tax dollars, and you haven’t paid income tax on those amounts yet. Therefore, when you take RMDs, it is subject to income tax as if regular income is earned during the year. Get advice from your tax professional.
What happens if you miss the RMD deadline?
If you missed an RMD, you may face penalties based on the amounts you should have withdrawn. With SECURE 2.0, the penalty is now 25% of the RMD amount. However, the penalty may be reduced to 10% if you correct the error within 2 years. Moreover, if the error was due to reasonable error and the steps are being taken to remedy the error, the IRS may waive the penalty. You can learn more about correcting a missed RMD from the IRS at Correcting Required Minimum Distributions. Note the 2023 RMD Age could be 72. Getting help from a tax professional may also help your case.
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