What Is an MRD? Minimum Required Distributions, Taxes, and Deadlines

A minimum required distribution is the amount you must withdraw each year from most tax-deferred retirement accounts once you reach age 73. The IRS more commonly calls it a required minimum distribution, or RMD, but the two terms mean the same thing. You calculate it by dividing the prior year-end balance of the account by a life expectancy factor the IRS publishes. Miss it, and the excise tax is 25 percent of whatever you should have withdrawn.

Which Accounts Are Covered

Under 26 U.S.C. § 401(a)(9), distributions are required from virtually every tax-deferred retirement account: Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and governmental 457(b) plans.¹ Defined benefit pensions meet the requirement through their own annuity payment schedules rather than the account-balance calculation.

Roth IRAs and designated Roth accounts inside 401(k) or 403(b) plans are the major exception. Because the contributions were already taxed, no distributions are required during the owner’s lifetime.¹ The exemption for designated Roth accounts inside employer plans took effect in 2024 under SECURE 2.0. Beneficiaries who inherit Roth accounts do face distribution rules once the owner dies.

If you own several IRAs, calculate the required amount for each one separately, then withdraw the total from whichever IRA you choose. The same aggregation works across multiple 403(b) accounts. Employer plans like 401(k)s are stricter: each plan’s required amount must come out of that specific plan.² Pulling money from the wrong type of account does not satisfy the requirement for one that owed a distribution.

When You Have to Start

The starting age is 73 for anyone who reaches that age after December 31, 2022, following the change made by SECURE 2.0.³ Your very first distribution is due by April 1 of the year after you reach 73. Every distribution after that is due by December 31.⁴

That April 1 grace period looks generous, but using it creates a problem. If you push your first withdrawal into the following calendar year, you’ll owe two distributions in that year: the delayed first one and the regular one for the current year. Both count as taxable income on the same return, which can push you into a higher bracket, increase Medicare premiums, and raise the taxable share of Social Security benefits.⁴ Taking the first distribution in the year you actually turn 73 avoids the pile-up.

The Still-Working Exception

If you keep working past 73, you can delay distributions from your current employer’s plan until the year you actually retire. This does not apply if you own 5 percent or more of the business sponsoring the plan.¹ It also does nothing for IRAs or old 401(k)s from previous employers. Those still follow the normal schedule.

How to Calculate the Amount

You need two numbers: the fair market value of the account on December 31 of the prior year, and a life expectancy factor from the IRS.

Your custodian or plan administrator reports the year-end balance on your December statement and on Form 5498. The life expectancy factors are in IRS Publication 590-B.⁵ Most people use Table III, the Uniform Lifetime Table. If your spouse is your sole beneficiary and more than ten years younger, use Table II instead, which produces a larger divisor and a smaller required withdrawal.

Divide the balance by the factor. If your IRA held $500,000 at year-end and you’re 73, the Uniform Lifetime Table gives a factor of 26.5, so the required distribution is $500,000 ÷ 26.5 = $18,868. You can always take more than the minimum. You can never take less.¹

Two things you cannot do with the money once it comes out. You cannot roll a required distribution into another tax-deferred account; the IRS explicitly bars it.⁶ And you cannot bank a large withdrawal one year and apply the surplus to next year’s requirement. Each year stands on its own.

How the Distribution Is Taxed

Distributions from Traditional IRAs, SEP IRAs, SIMPLE IRAs, and pre-tax 401(k) or 403(b) accounts are taxed as ordinary income in the year you receive them. They do not qualify for capital gains rates, no matter how the money was invested.¹ If you made nondeductible contributions to a Traditional IRA, the portion of each distribution representing your basis comes out tax-free, but most accounts are entirely pre-tax. Your custodian reports the distribution on Form 1099-R the following February.

Ways to Reduce the Tax Hit

Because every dollar of a pre-tax distribution counts as ordinary income, a large withdrawal can raise your tax bracket, increase the taxable share of Social Security benefits, and push up Medicare Part B and Part D premiums. A few approaches can soften that.

Qualified Charitable Distributions

If you’re 70½ or older, you can direct up to $111,000 in 2026 from your IRA straight to a qualifying charity through a qualified charitable distribution.⁷ The money moves directly from your custodian to the charity and never touches your bank account. The transfer counts toward your required distribution but is not included in adjusted gross income. That is better than taking the distribution and donating the cash afterward, because a QCD reduces income rather than producing an itemized deduction. Married couples each get their own $111,000 limit. The statutory basis is 26 U.S.C. § 408(d)(8).⁸

In-Kind Distributions

You do not have to sell investments to satisfy the requirement. If your IRA holds stocks or funds you want to keep, your custodian can transfer shares directly into a taxable brokerage account. The transfer satisfies the required amount based on the fair market value of the shares on the date of the move. You still owe income tax on that value, but you avoid selling at a bad time and keep the position intact. If the shares fall short of the required amount, add more assets or cash to close the gap.

Roth Conversions Before Age 73

Converting Traditional IRA funds to a Roth IRA in the years between retirement and age 73 shrinks future required distributions. You pay income tax on the converted amount now, but the money then grows tax-free inside the Roth and is not subject to distributions during your lifetime. For people with large pre-tax balances, strategic conversions during low-income years can meaningfully reduce both lifetime taxes and the size of future mandatory withdrawals.

What Happens If You Miss One

The excise tax for failing to take a required distribution is 25 percent of the shortfall.⁹ On a missed $20,000 distribution, that’s a $5,000 penalty on top of the income tax you’ll owe once you eventually withdraw the money.

You can drop the penalty to 10 percent by correcting the shortfall during a defined correction window. The window closes at the earliest of three events: the IRS mails a notice of deficiency, the IRS assesses the tax, or the last day of the second tax year after the year you missed the distribution. You also have to file a return reflecting the 10 percent rate during that window.⁹ You generally have roughly two years to fix the mistake and cut the penalty by more than half.

If the miss came from a genuine error rather than neglect, you can ask the IRS to waive the penalty entirely by filing Form 5329 with a written explanation of what went wrong and how you fixed it.¹⁰ The IRS grants these waivers reasonably often when the taxpayer has already taken the missed amount and can point to a plausible cause, such as a custodian processing delay or a miscalculated balance. Forgetting or not knowing the rule existed does not qualify.

Inherited Accounts

If you’re taking distributions because you inherited the account, the rules are different. Under the SECURE Act, most non-spouse beneficiaries of accounts whose owners died after December 31, 2019 must empty the account by the end of the tenth year following the owner’s death.¹ Surviving spouses, minor children of the account owner, disabled individuals, chronically ill individuals, and beneficiaries not more than ten years younger than the deceased owner are exempt from the ten-year deadline and can stretch distributions over their life expectancy.¹¹ Inherited Roth IRAs follow the same ten-year timeline for non-eligible beneficiaries, but the withdrawals are tax-free once the account has been open at least five years.

1
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
2
Internal Revenue Service. RMD Comparison Chart (IRAs vs. Defined Contribution Plans)
3
United States House of Representatives (US Code). 26 USC 401(a)(9) – Definition: Required Beginning Date
4
Internal Revenue Service. IRS Reminds Retirees: April 1 Final Day to Begin Required Withdrawals From IRAs and 401(k)s
5
Internal Revenue Service. Publication 590-B (2025), Distributions From Individual Retirement Arrangements (IRAs)
6
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
7
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted
8
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
9
Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
10
Internal Revenue Service. Instructions for Form 5329 (2025) – Section: Waiver of Tax for Reasonable Cause
11
Internal Revenue Service. Retirement Topics – Beneficiary