Savings Calculator
Required Minimum
Distribution (RMD) Calculator
Once you reach a certain age, the IRS requires you to withdraw a minimum amount each year from most pre-tax retirement accounts. These withdrawals are known as required minimum distributions, or RMDs, and their purpose is to ensure the government can receive tax payments on this money instead of it continuing to sit in your account.
Our RMD calculator helps you estimate how much you need to withdraw from your pre-tax retirement accounts when you reach RMD age, so you can avoid potential penalties and plan your retirement income effectively.
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Key Inputs:
- Your current age
- Retirement account balance (as of Dec. 31 of previous year)
- Expected rate of return on account
- Marital status and spouse’s age (if applicable)
Calculator Output:
- Required minimum distribution amount
- Future RMD projections
- Annual withdrawal schedule
- Tax implications overview
Your first RMD must be taken by April 1 of the year after you turn either 73 or 75. Here’s how to know which applies to you:
- If you were born between 1951 and 1959, your RMD age is 73
- If you were born in 1960 or later, your RMD age is 75
For those who turned 72 before Dec. 31, 2022, your RMDs likely began at age 72. In 2023, the SECURE Act 2.0 increased the RMD age to 73 and set the stage for it to rise to 75 in 2033.
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Why RMDs Can't Be
Ignored
The Initial Deposit
RMDs play a pivotal role in planning out a steady stream of income during retirement, and there are real penalties for not adhering to the rules. Most importantly, those who don’t take RMDs in time will be subject to up to a 50% excise tax on the amount they didn’t withdraw. The SECURE 2.0 Act offers chances to drop that to 25% or 10%, though, if the RMD mishap is corrected by taking extra within two years.
Additionally, RMDs can have significant tax implications due to the pre-tax nature of the accounts those funds typically reside in. When you withdraw assets from traditional IRAs or 401(k)s, you must pay income tax on them, with the exception of after-tax accounts like Roth IRAs. Therefore, by accurately calculating RMDs, retirees can plan their income tax liabilities and avoid potential financial hurdles that come with skipping that step.
When Do I Have to
Take RMDs?
Ongoing Savings
As you can see, your birth year will ultimately dictate when you must begin taking RMDs—age 73 or 75. However, here’s a closer look at the specific deadlines that apply and rule exceptions that exist.
RMD Deadlines
Generally, you have until Dec. 31 each year to take your RMD. However, for the first RMD, you have until April 1 of the year following the year you hit your required RMD age. Keep in mind, though, that delaying the first RMD means you’ll be taking two distributions in one year, potentially pushing you into a higher tax bracket for that tax year.
RMD Exceptions
Some exceptions to the RMD rules do exist to create some flexibility if you’re still working past the required age. If you’re still working and don’t own 5% or more of the business you work for, most retirement plans will allow you to delay RMDs until you actually retire.
This delay can yield significant tax advantages, such as reducing your overall taxable income, for those deciding to work later in life. However, 401(k)s from previous employers may not allow you to do this. Furthermore, Roth accounts aren’t subject to RMD rules.
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How to Calculate
RMDs
Meeting Your Financial Goals
An RMD calculation requires inputs such as your age, account balance and marital status, as well as using the IRS Uniform Lifetime Table to estimate your annual RMD. This straightforward method considers various factors influencing this amount.
You can use the IRS Uniform Lifetime Table to calculate your required minimum distribution amount this year by completing these steps:
- Locate your age on the IRS Uniform Lifetime Table
- Find the “life expectancy factor” that corresponds to your age
- Divide your retirement account balance (as of Dec. 31 of the previous year) by your current life expectancy factor
Since RMDs are recalculated annually, changes in your account balance and life expectancy will affect how much you must withdraw. It’s unlikely that you’ll withdraw the same amount each year.
Types of Retirement Accounts That Require RMDs
Meeting Your Financial Goals
Most types of retirement accounts require you to take RMDs. Here’s a quick list of accounts that require RMDs:
- Traditional IRAs
- 401(k)s
- 403(b)s
- 457(b)s
- SIMPLE IRAs
- SEP IRAs
- Profit-sharing plans
- Any other defined contribution accounts
The big exception to this rule are Roth IRAs and other Roth accounts, but there are some stipulations to this. Roth IRAs are not subject to RMDs in any way. However, for 2022 and 2023, Roth 401(k)s and Roth 403(b)s were subject to RMDs. This is no longer the case, though.
Roth IRAs are only subject to RMDs when inherited by a beneficiary. In this case, the IRS does require that you take RMDs from the account.
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Take RMDs from
Multiple Accounts
For people with multiple retirement accounts, combining RMDs can simplify the withdrawal process, but it’s vital to follow the IRS rules regarding different account types. If you have several traditional IRAs, you are allowed to calculate the required minimum distribution separately for each IRA, and then you can choose to withdraw the total RMD amount from one or any combination of those IRAs.
However, the rules differ for 401(k)s. Unlike IRAs, you cannot aggregate RMDs from multiple 401(k)s and take the total amount from just one. Each 401(k) must meet its own RMD requirement, which means a separate calculation and withdrawal for each account.
RMDs and Inherited
IRAs
If you’ve inherited an IRA, the RMD rules you must follow depend on your relationship to the original deceased owner. There are three general types of inheritors: a spouse, a non-spouse (such as a son or daughter) and an entity such as a trust or nonprofit organization.
The SECURE 2.0 Act raised the age for RMDs to 73. This retirement legislation expands the SECURE Act, which passed at the end of 2019 and raised the RMD age from 70.5 to 72. The SECURE Act also essentially eliminated the “stretch IRA” option for non-spouse inheritors of IRAs. The law now requires these non-spouse beneficiaries to take full payouts within 10 years after the death of the initial account owner.
How to Avoid
RMDs
One easy and perfectly legal way to avoid RMDs is to roll over your IRA or 401(k) assets into a Roth IRA or Roth 401(k). You’ll have a bigger tax bill the year you do it, but the IRS will not require you to take RMDs from these accounts.
Theoretically, you can leave money in a Roth IRA or Roth 401(k) until your death, and it can continue growing tax-free. But as long as your assets have been in these accounts for at least five years, you can make tax-free and penalty-free distributions after reaching age 59½.
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What If I Withdraw Too Little or Don't Take an RMD?
If you don’t make a proper RMD by the appropriate deadline, Uncle Sam will hit you with tax penalties. This will come in the form of 25% of the difference between the amount you withdrew that year and the amount you were supposed to take out that year. If you correct the mistake within two years, the penalty can be reduced to 10%.
However, you don’t have to take your RMD withdrawals as one lump sum. You can take it in increments throughout the year. Just make sure you withdraw the total RMD amount for the year by December 31.
Ready to calculate your RMDs and plan your retirement income strategy? Use our calculator above and consider connecting with a qualified Kapitalwise advisor to ensure you’re meeting all requirements while optimizing your tax situation.