Retirement Income Education

Required Minimum Distributions: A Complete Guide for Retirees

If you have money in a traditional IRA, 401(k), or similar retirement account, the IRS eventually requires you to start withdrawing it — whether you need the income or not. Understanding Required Minimum Distributions (RMDs) is one of the most important financial literacy topics for anyone approaching or living in retirement.

Introduction: What Are Required Minimum Distributions?

For decades, you may have contributed to a traditional IRA or employer-sponsored retirement plan like a 401(k) or 403(b). The money grew tax-deferred — meaning you didn’t pay income tax on it year by year. That arrangement was always intended to be temporary. The government has been patient, but eventually it wants its share.

That’s where Required Minimum Distributions come in. An RMD is the minimum amount the IRS mandates you withdraw from certain retirement accounts each year once you reach a specific age. These withdrawals are added to your taxable income for the year, so the government finally collects the tax revenue it deferred for all those years.

For retirees throughout Port St. Lucie, Stuart, Vero Beach, and the broader Treasure Coast, RMDs can have significant implications for your tax bill, your Medicare premiums, your Social Security taxation, and your overall financial picture. Understanding them thoroughly — not just the basics, but the nuances — puts you in a much stronger position to plan thoughtfully.

This guide walks you through every major dimension of RMDs: when they start, how they’re calculated, what accounts they apply to, the consequences of missing one, and smart strategies that Treasure Coast retirees should be aware of.

Which Retirement Accounts Require Minimum Distributions?

Not all retirement accounts work the same way. Here is a clear breakdown of which accounts are generally subject to RMD rules and which are not.

Accounts that ARE typically subject to RMDs:

• Traditional IRAs — The most common account subject to RMDs. This includes IRAs you funded with pre-tax contributions as well as rollover IRAs.
• 401(k) plans — Traditional (pre-tax) 401(k) accounts through a current or former employer.
• 403(b) plans — Common for teachers, hospital workers, and nonprofit employees.
• 457(b) plans — Used by many government and some nonprofit employees.
• SEP IRAs and SIMPLE IRAs — Retirement accounts commonly used by self-employed individuals and small business owners.
• Inherited IRAs — Both traditional and Roth inherited IRAs (more on this shortly) now have their own distribution rules.

Accounts that are generally NOT subject to RMDs (for the original owner):

• Roth IRAs — Original owners of Roth IRAs are not required to take distributions during their lifetime. This is one of the major advantages of Roth accounts.
• Roth 401(k) accounts — As of 2024, thanks to changes under SECURE 2.0, Roth designated accounts within 401(k) plans are also exempt from RMDs during the account owner’s lifetime.
• Regular brokerage (taxable) accounts — These don’t have RMD rules because they don’t receive the same tax-deferred treatment.

It’s worth noting: if you still work for an employer and participate in that company’s 401(k), you may be able to delay RMDs from that specific account past your required beginning date — but only if you don’t own more than 5% of the company. This exception does not apply to IRAs or accounts from previous employers.

When Do Required Minimum Distributions Begin?

The age at which RMDs begin has changed several times in recent legislation, so it’s important to know where you stand based on your birth year.

Your “Required Beginning Date” (RBD) is April 1 of the year following the year you reach your applicable starting age. For example, if you turn 73 in 2025, your first RMD must be taken by April 1, 2026.

Important caution about delaying your first RMD: While you are technically allowed to delay your very first RMD to April 1 of the following year, doing so means you will have to take two RMDs in a single calendar year — one for the prior year and one for the current year. That double distribution can push you into a higher tax bracket and may trigger surcharges on your Medicare premiums (called IRMAA — Income-Related Monthly Adjustment Amount). Many retirees on the Treasure Coast find it advantageous to take their first RMD in the year they actually turn the required age to avoid this bunching effect.

After the first year, all subsequent RMDs must be taken by December 31 of each calendar year.

How Is Your RMD Amount Calculated?

The IRS uses a straightforward formula to calculate each year’s RMD, though the inputs change every year.

Step 1 — Find your account balance: Use the fair market value of your account(s) as of December 31 of the prior year. Your financial institution or plan custodian typically provides this figure on your year-end statement.

Step 2 — Find your distribution period: The IRS publishes life expectancy tables in Publication 590-B. Most account owners use the Uniform Lifetime Table, which provides a distribution period factor based on your age. For example, a 73-year-old would use a factor of 26.5, while an 80-year-old would use 20.2.

Step 3 — Divide: Divide your December 31 balance by the distribution period factor. The result is your minimum required withdrawal for the year.

A practical example: Suppose you are 74 years old and your traditional IRA had a balance of $480,000 on December 31 of last year. The Uniform Lifetime Table factor for age 74 is 25.5. Your RMD would be $480,000 ÷ 25.5 = approximately $18,824.

One important exception — the Joint Life Expectancy Table: If your sole beneficiary is a spouse who is more than 10 years younger than you, you may use the Joint Life and Last Survivor Expectancy Table, which produces lower RMD amounts because it factors in a longer combined life expectancy. This can meaningfully reduce annual distributions for couples with a significant age gap.

Multiple accounts: If you own multiple traditional IRAs, you must calculate the RMD for each account separately — but you can aggregate them and take the total from any one or combination of your IRAs. However, 401(k) RMDs must be taken from each 401(k) account individually and cannot be aggregated with IRAs.

The Tax Impact of RMDs — What Treasure Coast Retirees Should Know

RMDs are taxed as ordinary income in the year you receive them. They are not eligible for capital gains rates. This has several downstream effects worth understanding:

Social Security Taxation

Up to 85% of your Social Security benefits can become taxable depending on your “combined income” (also called provisional income). Adding an RMD to your other income can push more of your Social Security benefit into taxable territory. Florida does not have a state income tax, which is one reason many retirees relocate here — but federal taxes still fully apply to RMDs.

Medicare IRMAA Surcharges

Medicare Part B and Part D premiums are determined by your Modified Adjusted Gross Income (MAGI) from two years prior. Large RMDs — particularly in the first year or two when you may take a double distribution — can push your income above IRMAA thresholds and result in significantly higher Medicare premiums. This is a commonly overlooked consequence of RMD planning.

Net Investment Income Tax

Higher-income retirees may also encounter the 3.8% Net Investment Income Tax (NIIT) if their modified adjusted gross income exceeds certain thresholds ($200,000 for single filers, $250,000 for married filing jointly as of current law). While RMDs themselves are not investment income, they increase total income, which can affect whether the NIIT applies to your other investment earnings.

Federal Withholding

You can elect to have federal income tax withheld from your RMD, similar to withholding from a paycheck. The default withholding rate is 10%, but you can increase or decrease this amount, or elect no withholding and pay estimated taxes quarterly instead. Planning this carefully helps avoid underpayment penalties.

What Happens If You Miss an RMD?

Missing an RMD — or taking less than the required amount — used to carry one of the harshest penalties in the tax code. Here’s where things stand today:

Under the SECURE 2.0 Act (effective 2023), the penalty for failing to take a required minimum distribution was reduced from 50% of the shortfall to 25% of the amount not withdrawn. Furthermore, if you correct the shortfall within a defined correction window (generally by the end of the second year after it was due), the penalty is further reduced to 10%.

While these reductions are a meaningful improvement, a 10–25% penalty on top of ordinary income taxes still represents a substantial financial cost. The IRS also has a process — Form 5329 and a written explanation — that allows you to request a waiver of the penalty if you can demonstrate the shortfall was due to reasonable error and you’ve taken corrective action promptly.

The practical takeaway: treat RMD deadlines seriously. Set reminders, work with your custodian or advisor, and don’t leave your December distribution to the last minute — processing delays can cause you to miss the December 31 deadline.

Strategies Worth Understanding Around RMDs

There are several approaches that retirees commonly explore in connection with RMD planning. These are educational concepts — not prescriptions — and your personal situation determines whether any of them are appropriate for you.

Qualified Charitable Distributions (QCDs)

If you are age 70½ or older, you can direct up to $105,000 per year (indexed for inflation) from your IRA directly to a qualified charity. This is called a Qualified Charitable Distribution. The amount transferred counts toward satisfying your RMD but is excluded from your taxable income. For charitably inclined Treasure Coast retirees who don’t need all of their RMD for living expenses, this can be a tax-efficient way to support local nonprofits, churches, or causes — while keeping your taxable income lower.

Roth Conversions Before RMDs Begin

In the years between retirement and your RMD start date, your taxable income may be relatively low. Some retirees use this window to convert portions of their traditional IRA to a Roth IRA. Paying tax now on a converted amount reduces the traditional IRA balance subject to future RMDs — and assets in a Roth IRA grow tax-free and are not subject to RMDs during the owner’s lifetime. The trade-off is paying tax today rather than later, so the math depends on your current versus expected future tax rates, among other factors.

Taking More Than the Minimum

You are always permitted to withdraw more than your RMD in any given year. Some retirees choose to do this strategically — for example, to fill a lower tax bracket in a year when their income is otherwise modest. Excess distributions beyond the RMD are still taxable, but voluntary distributions can sometimes reduce the size of future RMDs by drawing down the account balance more quickly.

Aggregating IRAs for Convenience

If you own several IRAs, consolidating them into one account can simplify the annual RMD calculation and distribution process. Fewer accounts also mean fewer year-end statements to track, lower administrative complexity, and potentially lower account fees.

Inherited IRAs: A Changed Landscape for Beneficiaries

If you are a beneficiary who has inherited an IRA — or if you are planning your estate and thinking about what your heirs will face — the rules that govern inherited IRAs changed dramatically under the SECURE Act of 2019 and continue to be refined by ongoing IRS guidance.

The 10-Year Rule: For most non-spouse beneficiaries who inherited an IRA after December 31, 2019, the entire account must be distributed by the end of the 10th year following the year of the original owner’s death. There is no longer a “stretch IRA” option for most heirs that allowed distributions over their own life expectancy.

Eligible Designated Beneficiaries: Certain beneficiaries — including surviving spouses, minor children of the account owner, disabled individuals, chronically ill individuals, and beneficiaries not more than 10 years younger than the original owner — are still permitted to use their own life expectancy for distributions, providing more flexibility.

Annual RMDs within the 10-year window: IRS guidance has indicated that if the original account owner had already begun taking RMDs, beneficiaries subject to the 10-year rule must also take annual distributions in years 1–9, with the remainder taken in year 10. This requirement has been a source of ongoing regulatory clarification, so staying current with IRS guidance (or consulting a tax professional) is essential.

For Treasure Coast families who have received an inheritance or are planning to leave retirement accounts to children or grandchildren, understanding these rules is an important part of