Q&A: IRA Withdrawals for Required Minimum Distributions (RMDs)

Once you turn 73, tax law requires you to begin withdrawing funds—called Required Minimum Distributions (RMDs)—from traditional IRAs, SIMPLE IRAs, and SEP IRAs. Since these accounts can’t grow tax-deferred indefinitely, understanding RMD rules is essential.

Early Withdrawals: What to Know

If you withdraw funds from a traditional IRA before age 59½, the distribution is taxable and may incur a 10% penalty. However, exceptions exist, including withdrawals for:

• Qualified higher education expenses

• Up to $10,000 for a first-time home purchase

• Total and permanent disability

• Up to $5,000 per child for qualified birth or adoption expenses

• Health insurance premiums while unemployed

These are just a few of the exceptions. The IRS provides a full list of qualifying circumstances.

When Must You Take Your First RMD?

You must take your first RMD by April 1 of the year after you turn 73. Previously, the age was 72, but the Secure 2.0 Act raised it to 73 starting in 2023.

How Is Your RMD Calculated?

Your RMD is determined by dividing your prior year’s account balance by a life expectancy factor from the IRS’s Uniform Lifetime Table. If your spouse is your sole beneficiary and at least 10 years younger than you, a different table applies.

Managing RMDs Across Multiple Accounts

If you have multiple IRAs, you must calculate the RMD for each separately. However, you can withdraw the total amount from one IRA or spread it across multiple accounts.

Can You Withdraw More Than the RMD?

Yes, but excess withdrawals cannot be applied toward future RMDs. Balancing your income needs while preserving the tax advantages of your IRA is key.

Can You Take Multiple Withdrawals?

Yes, you can take your RMD in multiple distributions throughout the year, as long as you withdraw the full amount by December 31 (or April 1 for your first RMD).

Penalties for Missing an RMD

Failing to withdraw the full RMD results in a 50% tax penalty on the amount not withdrawn. Proper planning is crucial to avoid unnecessary penalties.

Plan Ahead

To ensure you’re managing your retirement funds wisely, consult with a financial professional. They can help with RMD strategies, beneficiary designations, and whether a Roth IRA—a tax-free retirement savings option—may benefit you.