The 4% Rule and the Rule of 72: Origins, Examples and Limits
Two rules of thumb every retirement planner uses, where they came from, and what to keep in mind.
RMD Rules Explained: Age 73, Age 75 and What Changed
A required minimum distribution (RMD) is the amount the IRS requires you to withdraw each year from most tax-deferred retirement accounts once you reach a certain age. The rules have changed several times in recent years, so it is worth understanding both the calculation and the current timetable.
Which accounts have RMDs?
RMDs apply to traditional IRAs, SEP and SIMPLE IRAs, and employer plans such as 401(k) and 403(b) accounts. Roth IRAs have no RMDs during the owner’s lifetime. Beginning in 2024, Roth accounts inside employer plans were also freed from lifetime RMDs.
The calculation
RMD = account balance on December 31 of the previous year ÷ distribution period. The distribution period comes from the IRS Uniform Lifetime Table, based on your age in the year you take the distribution.
- Age 73: divisor 26.5, so a $500,000 balance gives an RMD of about $18,868.
- Age 75: divisor 24.6, giving about $20,325.
- Age 80: divisor 20.2, giving about $24,752.
- Age 90: divisor 12.2, giving about $40,984.
If your sole beneficiary is a spouse more than ten years younger, a different table (the Joint Life and Last Survivor table) can give a smaller RMD.
How the starting age changed
- For many years RMDs began at age 70½.
- The SECURE Act of 2019 raised the age to 72 for people who turned 70½ after 2019.
- SECURE 2.0, signed in December 2022, raised it to 73 from 2023 and to 75 from 2033.
In practice: if you were born in 1950 or earlier, you were already taking RMDs. People born in 1951–1959 start at 73. People born in 1960 or later start at 75.
Other recent changes
- Smaller penalty. The excise tax for missing an RMD fell from 50% to 25% of the shortfall, and to 10% if the error is corrected within the correction window.
- Updated life-expectancy tables. The IRS revised the tables effective 2022, which gave slightly longer distribution periods and therefore smaller required withdrawals. At age 72, for example, the divisor moved from 25.6 to 27.4.
- Roth 401(k) relief. No lifetime RMDs from 2024.
- Inherited accounts. Most non-spouse beneficiaries must empty an inherited IRA within 10 years, and the IRS finalised rules in 2024 explaining when annual withdrawals are also required during that period.
Timing rules and traps
- Your first RMD can be delayed until April 1 of the year after you reach the starting age, but then you must take a second RMD by December 31 of the same year, which can push you into a higher tax bracket.
- If you own several IRAs you can total the RMDs and take them from any one. 401(k) plans must each pay their own.
- RMDs count as taxable income and can affect Medicare premiums and the taxation of Social Security.
- A qualified charitable distribution of up to about $100,000 a year (indexed for inflation) can satisfy your RMD without being taxed, for people who are 70½ or older.
Planning ideas
People sometimes begin withdrawals or Roth conversions before RMDs start, to smooth taxable income over several years. Whether that makes sense depends on your tax bracket, other income and estate plans, so it is a conversation for a tax adviser.
Rules and dollar limits are updated regularly. Check current IRS publications or ask a qualified adviser before relying on any calculator.
Frequently asked questions
What age do RMDs start?
Age 73 for people born 1951–1959 and age 75 for those born in 1960 or later.
What happens if I miss an RMD?
The excise tax is 25% of the amount not withdrawn, reduced to 10% if you correct the mistake within the correction window.
Do Roth IRAs have RMDs?
Not for the original owner during their lifetime. Inherited Roth IRAs are subject to beneficiary rules.
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This article is for general information only and is not financial, medical or professional advice.