Required Minimum Distributions: When to Take Them and How to Reduce the Tax Hit

If you have money in a traditional IRA or 401(k), the IRS will not let it sit there forever. At a certain age, you must start taking money out each year. These forced withdrawals are called Required Minimum Distributions, or RMDs.

Miss the deadline or take too little, and you could face a steep penalty. But with some planning, you can lower the tax bill and keep more of your hard-earned savings.

Here is what you need to know about RMDs in 2026.

What Are RMDs and Why Do They Exist?

When you put money into a traditional IRA or 401(k), you got a tax break up front. The IRS let you skip paying taxes on that money at the time. But the deal was never to avoid taxes forever. It was to delay them.

RMDs are the government’s way of collecting those deferred taxes. Once you reach a certain age, you must pull money out of these accounts each year. You owe income tax on most of what you withdraw.

This applies to:

Traditional IRAs
401(k) and 403(b) plans
457(b) plans
SEP IRAs and SIMPLE IRAs

Roth IRAs are the big exception. You already paid taxes on that money going in. So Roth IRAs have no RMDs during the original owner’s lifetime.

When Do RMDs Start?

Thanks to the SECURE 2.0 Act, the starting age for RMDs has changed in recent years. Here is the current rule:

Born 1960 or earlier: RMDs started at age 72 or 73, depending on your birth year.
Born 1961 or later: RMDs begin at age 75.

Your first RMD is due by April 1 of the year after you turn the required age. After that first year, each RMD is due by December 31.

A warning about that first-year grace period. If you wait until April 1 to take your first RMD, you will have to take two RMDs in the same calendar year (one by April 1 and another by December 31). That double withdrawal could push you into a higher tax bracket. Many advisors suggest taking your first RMD in the year you turn the required age to avoid this.

How Much Do You Have to Withdraw?

Your RMD amount depends on two things:

Your account balance on December 31 of the prior year
A life expectancy factor from IRS tables

The IRS publishes these tables in Publication 590-B. The most common one is the Uniform Lifetime Table, which most people use.

Here is a simple example. Say your traditional IRA had $500,000 on December 31, 2025. If you are 75 in 2026, the Uniform Lifetime Table gives you a factor of 24.6. Divide $500,000 by 24.6, and your RMD is about $20,325.

As you get older, the factor gets smaller. That means you must take out a larger percentage each year.

If you have multiple traditional IRAs, you add up all the RMD amounts but can take the total from any one or combination of those IRAs. However, 401(k) RMDs must be taken separately from each 401(k) account.

The Penalty for Missing an RMD

The penalty used to be brutal: 50% of the amount you failed to withdraw. SECURE 2.0 dropped that to 25%. And if you correct the mistake quickly (within two years), the penalty drops further to 10%.

Still, even a 10% penalty is money you did not need to lose. Set calendar reminders. Talk to your financial advisor. Do not let deadlines slip by.

Six Strategies to Reduce the Tax Hit

RMDs are taxed as ordinary income. That means they could push you into a higher bracket. Here are ways to soften that blow.

1. Start Roth Conversions Before RMDs Begin

If you are in your late 60s or early 70s and have not yet started RMDs, consider converting some of your traditional IRA to a Roth IRA. You will pay taxes on the converted amount now, but the money then grows tax-free in the Roth. Future withdrawals from the Roth are tax-free, and there are no RMDs.

The best time to do this is often right after you retire but before Social Security and RMDs start, when your income may be lower.

2. Donate Your RMD to Charity (QCD)

A Qualified Charitable Distribution, or QCD, lets you send up to $105,000 per year (2026 limit) directly from your IRA to a qualifying charity. The money counts toward your RMD but does not show up as taxable income.

This is one of the most powerful tax tools for retirees who give to charity. The key rules:

You must be 70 and a half or older
The money must go straight from the IRA to the charity (not to you first)
It only works with IRAs, not 401(k)s
The charity must be a qualified 501(c)(3) organization

3. Use the “Still Working” Exception

If you are still employed and have a 401(k) with your current employer, you may be able to delay RMDs from that specific 401(k) until you actually retire. This does not apply to IRAs or old 401(k)s from previous jobs. It only covers your current employer’s plan. And you cannot own more than 5% of the company.

4. Reinvest in a Taxable Brokerage Account

You must take the RMD, but you do not have to spend it. If you do not need the money for living expenses, reinvest it in a regular brokerage account. You will owe taxes on the withdrawal, but the money can keep growing. Future gains in the brokerage account may qualify for lower long-term capital gains rates.

5. Pair RMDs with Tax-Loss Harvesting

If you have investments in a taxable account that have lost value, selling them at a loss can offset other income, including RMD income. This is called tax-loss harvesting. You can deduct up to $3,000 in net capital losses against ordinary income each year and carry forward any excess.

6. Spread Withdrawals Throughout the Year

Instead of taking one large RMD in December, consider setting up monthly or quarterly withdrawals. This does not change the total tax, but it can help with cash flow and budgeting. It also gets the money reinvested sooner if you are putting it into a taxable account.

Common RMD Mistakes to Avoid

Forgetting about old accounts. If you have a 401(k) from a job you left 20 years ago, it still counts. Track every retirement account you own.

Miscalculating the amount. Use the correct IRS table and the right year-end balance. If you are unsure, ask your plan administrator or a tax professional to help.

Taking from the wrong account type. IRA RMDs can be combined and taken from any IRA. But 401(k) RMDs must come from each individual 401(k).

Ignoring inherited accounts. If you inherited a retirement account, the RMD rules for beneficiaries are different and often stricter. The SECURE Act of 2019 requires most non-spouse beneficiaries to empty inherited accounts within 10 years.

What About Roth 401(k)s?

Good news here. Starting in 2024, Roth 401(k)s no longer have RMDs. This was another change from SECURE 2.0. Previously, you had to either take RMDs from a Roth 401(k) or roll it into a Roth IRA to avoid them. Now, Roth 401(k)s follow the same rule as Roth IRAs: no RMDs while you are alive.

The Bottom Line

RMDs are a fact of life for anyone with traditional retirement accounts. You cannot avoid them entirely, but you can plan around them. The earlier you start thinking about strategies like Roth conversions and QCDs, the more flexibility you will have.

If your retirement accounts are large, talk to a tax advisor before RMD age hits. A few years of smart planning can save you thousands in taxes over a long retirement.

Reported by Robert A. Williams with additional research from the SeniorDaily editorial team. For corrections or updates, please contact us.

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