Retirees face a complex set of rules governing withdrawals from their retirement accounts. This guide provides a clear overview of Individual Retirement Account (IRA) rules – covering the basics of traditional vs. Roth IRAs, Required Minimum Distributions (RMDs), the Required Beginning Date (RBD) for first withdrawals, and the Roth IRA 5-year rule. We also highlight recent changes (like those in the SECURE Act laws) and offer strategies to manage these requirements.

Why These Rules Matter: Understanding IRA withdrawal rules helps retirees avoid penalties, minimize taxes, and ensure their retirement savings last. Recent law changes make it more important than ever to stay informed.

Scope of This Guide: We cover traditional vs. Roth IRA basics, when you must start taking money out (RMDs and RBD), special rules for Roth IRAs (no lifetime RMDs and the 5-year rule), plus key recent updates that retirees need to know.

Overview of Traditional and Roth IRAs

Traditional IRAs and Roth IRAs are both tax-advantaged retirement accounts, but they have crucial differences in taxation and withdrawal rules:

• Traditional IRA: Contributions may be tax-deductible (made with pre-tax money), investments grow tax-deferred, and withdrawals in retirement are generally taxed as ordinary income. Traditional IRAs do require RMDs – you must start taking out a minimum amount each year once you reach a certain age (more on RMDs below).

• Roth IRA: Contributions are made with after-tax dollars (no upfront tax deduction), investments grow tax-free, and qualified withdrawals in retirement are tax-free. Importantly, RMyalou4062oth IRAs do not have RMDs during the original owner’s lifetime. This means a Roth IRA owner isn’t forced to withdraw money at any age.

Benefits: Both types of IRAs allow your investments to grow without annual taxes on earnings. Traditional IRAs can reduce your current taxable income (if you qualify to deduct contributions), while Roth IRAs provide tax-free income later and give you more flexibility since you’re not forced to withdraw funds in retirement.

When RMDs Begin

As of 2023, retirees must begin taking RMDs at age 73—up from the previous age of 72. For example, if you turn 73 in 2024, your first required withdrawal must be made by April 1, 2025. Looking ahead, the RMD starting age will increase again to 75 in 2033 for those born in 1960 or later.

What Happens If You Miss One

Missing an RMD can be costly. The IRS charges a 25% excise tax on any amount that wasn’t withdrawn by the deadline. However, if you correct the mistake within two years, the penalty drops to 10%—a good reason to double-check your distributions each year.

Roth IRAs: The Exception to the Rule

One big advantage of a Roth IRA is that there are no lifetime RMDs. Account owners aren’t required to take withdrawals during their lifetime, allowing funds to continue growing tax-free for as long as they wish. This makes Roth IRAs an attractive option for those who want greater flexibility in retirement and potentially more to pass on to heirs.

Note: With both types of accounts, withdrawals before age 59½ may incur a 10% early withdrawal penalty (with some exceptions). This reflects the fact that these accounts are intended for retirement savings.

Required Minimum Distributions (RMDs)

Required Minimum Distributions (RMDs) are the minimum amounts retirees must withdraw annually from certain retirement accounts once they reach a specified age. The purpose is to ensure tax-deferred money isn’t left to grow tax-free indefinitely. Here’s what retirees need to know:

• Which accounts have RMDs? RMD rules apply to traditional IRAs (and SEP IRAs and SIMPLE IRAs) as well as employer plans like 401(k)s and 403(b)s. Roth IRAs are exempt from RMDs during the owner’s lifetime. (However, beneficiaries inheriting any IRA, including Roth IRAs, have their own distribution rules after you pass away.)

• Starting age for RMDs: As of 2023, you must start taking RMDs at age 73. This was increased from age 70½ (then later 72) by recent legislation, and it will rise to 75 for those born in 1960 or later (effective in 2033). In practical terms, if you turn 73 in 2025, your first RMD is due by April 1, 2026 (you have the option to take it in 2025 or delay until early 2026, as explained below).

• How RMDs are calculated: Each year, once you are subject to RMDs, you calculate the minimum amount by dividing your account’s prior year-end balance by a life expectancy factor from IRS tables. The result is the minimum dollar amount that must be withdrawn by year-end. You can always withdraw more, but failing to take at least the minimum results in a hefty penalty (explained shortly).

• Tax on RMDs: RMD withdrawals are generally taxed as ordinary income (since contributions to traditional IRAs/401(k)s were typically pre-tax). The RMD amount adds to your taxable income for the year. If you made any after-tax contributions to your IRA, part of the RMD would be a non-taxable return of basis, and qualified Roth IRA withdrawals are tax-free. Most retirees should plan for the income tax impact of RMDs, which can potentially push you into a higher tax bracket or increase taxes on your Social Security benefits.

The Required Beginning Date (RBD)

The Required Beginning Date (RBD) is the deadline for taking your very first RMD. For IRAs and most retirement plans, the RBD is April 1 of the year after you reach the RMD starting age.

For example, if you turned 73 in August 2024, you can take your first RMD anytime in 2024, but you have the option to delay it until as late as April 1, 2025. That April 1, 2025 deadline is your RBD.

Some important nuances about the RBD and first RMD:

• Bunching effect of first-year delay: If you delay your first RMD into the next calendar year (up to the April 1 RBD), you will still need to take your second RMD by December 31 of that same year. This means two RMDs would be taxable in one year. Many retirees choose to take their first RMD in the year they turn 73 to avoid doubling up the following year. However, the rule offers flexibility – if one year’s income is unusually high or low, you can decide which year to take that first withdrawal to minimize taxes.

• Still-working exception (for workplace plans): If your retirement money is in a current employer’s plan (like a 401(k)) and you continue working past the RMD age, you may be able to delay RMDs from that workplace plan until you actually retire. This “still-working” exception does not apply to IRAs (and it doesn’t apply if you own 5% or more of the company sponsoring the plan). In the case it applies, your RBD for that employer plan would be April 1 of the year after you retire, instead of the year after you turn 73.

After you take your first RMD, all subsequent RMDs are due by December 31 each year. The April 1 RBD is essentially a one-time extension for the first withdrawal only.

Penalties for Missing an RMD (and Exceptions)

Failing to take an RMD by the deadline can be costly. Historically, the penalty was a whopping 50% excise tax on the amount not withdrawn. Recent changes have reduced this: now a missed RMD generally incurs a 25% penalty, and if you promptly correct the mistake (by taking the late distribution and filing an amended tax return), the penalty drops to 10%.

The IRS may even waive the penalty entirely if you can show the missed RMD was due to a reasonable error and you take steps to remedy it. (You’d typically submit a form explaining the situation when you fix the shortfall.)

Avoiding or fixing mistakes: Mark your calendar, use reminders, or set up automatic withdrawals with your financial institution. If you do miss one, take the required distribution as soon as you realize it. Then inform the IRS of the error when filing your taxes (there’s a form for that). Prompt action can go a long way, especially under the more lenient rules now in place.

Exceptions and special cases: There’s no blanket exemption from RMD rules (aside from the still-working delay for certain employer plans noted above). However, a couple of nuances are worth mentioning:

• If you have multiple traditional IRAs, you must calculate each account’s RMD separately, but you are allowed to withdraw the total combined amount from any one (or more) of your IRAs. This can simplify your withdrawals – for example, you could take the entire RMD amount from one IRA and leave the others untouched that year. (Note: this aggregation rule applies only to IRAs of the same type. RMDs from 401(k)s or other employer plans must be taken from each respective account individually.)

• If you have a Roth 401(k) from a former employer, be aware that prior to 2024 those accounts were subject to RMDs at the applicable age. A recent law change (SECURE 2.0 Act) eliminated RMDs on Roth employer accounts starting in 2024, aligning them with Roth IRAs. Now Roth 401(k)s will not force distributions during the owner’s life either. (If you left a Roth 401(k) behind at a past job, you could roll it into a Roth IRA for simplicity, but it’s no longer required to avoid RMDs.)

• RMD rules also apply to inherited retirement accounts after the owner’s death. Under current law, most non-spouse beneficiaries who inherit an IRA must withdraw all the funds within 10 years (the “10-year rule” introduced by the SECURE Act). There are exceptions for certain “eligible designated beneficiaries” – such as a surviving spouse or a disabled/chronically ill individual – who are allowed to stretch distributions over their life expectancy instead of 10 years. This doesn’t affect your own RMDs as a retiree, but it’s important for estate planning and for your heirs to understand.

RMDs and Roth IRAs: Key Differences

One of the biggest differences between traditional and Roth IRAs is how RMDs apply:

• Roth IRAs have no RMD requirement during the original owner’s lifetime. You are never forced to take money out of your Roth IRA while you are alive. You can let the account grow and even pass it on to your heirs without ever tapping it. This provides tremendous flexibility and the potential for continued tax-free growth.

• Traditional IRAs (and most other retirement plans) do have RMDs. Starting at the required age, you must begin taking money out of a traditional IRA each year, whether you need the money or not, and pay taxes on those withdrawals.

This difference means that many retirees use Roth IRAs as a tool for managing future taxes or for estate planning. For example, if you don’t need the RMD money, having more of your savings in a Roth IRA allows you to avoid forced taxable withdrawals and even leave the money untouched for your beneficiaries.

However, note that beneficiaries of Roth IRAs are subject to distribution rules after you pass away. Although you never have to take an RMD from your own Roth IRA, your heirs will generally have to withdraw all the inherited Roth funds within 10 years (unless they fall under an exception for eligible beneficiaries). The good news is that those withdrawals will typically be tax-free for the beneficiaries, provided the Roth IRA had met the 5-year aging requirement. Essentially, during your life, Roth IRAs have no required withdrawals, but after your death, your heirs can’t keep a Roth growing indefinitely (they get up to 10 years of continued growth).

The Roth IRA 5-Year Rule

Roth IRAs come with a unique timing requirement often referred to as the 5-year rule. This rule determines whether withdrawals from a Roth IRA will be tax-free (qualified) or not. In essence, for a Roth IRA withdrawal of earnings to be completely tax-free, you must meet two conditions: (1) you are at least 59½ years old (or meet another qualifying exception), and (2) your Roth IRA has been open for at least 5 years. Let’s break down the details of the 5-year rule:

• General 5-year rule (for earnings): The five-year clock starts on January 1 of the year you made your first Roth IRA contribution. Five tax years must pass before any earnings can be withdrawn tax-free (assuming you’re also over 59½ or otherwise eligible). For example, if you first contributed to a Roth in mid-2020, the clock retroactively starts January 1, 2020, and you satisfy the 5-year rule on January 1, 2025. Any earnings you withdraw after that date (and after age 59½) would be tax-free. (Remember, you can always withdraw your original Roth contributions at any time without tax or penalty, because those were made with after-tax dollars. The 5-year rule applies to the earnings on your contributions.)

• Age requirement for qualified withdrawals: In addition to the 5-year rule, you generally must be age 59½ or older for the distribution of Roth earnings to be considered “qualified” (tax-free). There are a few exceptions to the age rule that allow earlier withdrawals without the 10% penalty – for instance, if you become disabled, or you’re using up to $10,000 of Roth funds for a first-time home purchase, or if the distribution is made to your beneficiaries after your death. But for most retirees, being over 59½ is the relevant condition in conjunction with the 5-year rule.

• Multiple Roth IRAs: The 5-year rule applies across all your Roth IRAs collectively, not separately to each account. Once you’ve met the 5-year requirement with your first Roth IRA, any Roth IRA you own (even if opened later) is considered to have met the 5-year rule. In other words, the IRS starts the clock with your first Roth contribution ever; moving funds or opening new Roth accounts later doesn’t restart anything. (Roth 401(k)s have their own 5-year clock separate from Roth IRAs, but if you roll a Roth 401(k) into a Roth IRA, the IRA’s clock – or your original Roth IRA start date – will govern.)

• Roth conversions have a separate 5-year rule: If you converted money from a traditional IRA or 401(k) to a Roth IRA, each conversion amount has its own five-year clock for penalty-free withdrawal of the converted principal if you are under 59½. This rule is to prevent people younger than 59½ from converting a bunch of money to Roth and then immediately withdrawing it to circumvent the early withdrawal penalty. For example, if you did a Roth conversion in 2022 at age 55, you need to wait until 2027 to take that converted amount out without a 10% penalty (unless an exception applies). Note that this conversion 5-year rule is only about the 10% penalty on the converted principal – it does not affect the tax-free status of Roth earnings, which is governed by the general rule above. If you’re over 59½, the conversion 5-year rule is essentially a non-issue (since the early withdrawal penalty doesn’t apply after 59½).

• Inherited Roth IRAs: Beneficiaries who inherit a Roth IRA are not subject to the 10% early withdrawal penalty at all (distributions due to death are exempt from the penalty). However, the 5-year rule still matters for the beneficiary in terms of taxation of earnings. If the original owner had not met the 5-year requirement at the time of death, the beneficiary will have to wait until the original 5-year period is over to withdraw earnings tax-free. Any earnings taken out before that date would be taxable (though not penalized). If the original owner already satisfied the 5-year rule, then any withdrawals the heir takes from the inherited Roth IRA are tax-free for them (and remember, they’ll likely be using the 10-year rule to empty the account).

In summary, to enjoy the full tax-free benefits of a Roth IRA, make sure you’ve met the 5-year aging requirement. For many long-time Roth owners, this is already taken care of. But if you opened your first Roth IRA only recently (or plan to start one), be aware of the five-year clock – even if you’re well into your 60s or 70s – because it affects the tax treatment of withdrawals for you and even for your beneficiaries.

Tax Implications of RMDs for Retirees

When you withdraw money as an RMD from a traditional IRA or 401(k), that distribution counts as taxable income in the year you take it. This has several implications:

• Income tax: RMDs are taxed at your ordinary income tax rate. If your RMDs are large, they can push you into a higher tax bracket for that year. It’s important to anticipate the tax bill – for example, if you have a $1 million IRA at age 73, your first-year RMD might be around $40,000 (just as an illustration), all of which gets added to your other income on your tax return.

• Impact on Social Security & Medicare: Higher income from RMDs can cause a larger portion of your Social Security benefits to become taxable. It can also influence Medicare premiums. Medicare Part B and Part D premiums are based on your income; a significant RMD can bump you above a threshold (IRMAA brackets), leading to higher monthly premiums.

• Tax planning for couples: If you’re married, remember that after one spouse dies, the survivor will file as a single taxpayer, which has less favorable tax brackets. RMDs that were manageable on a joint return could push a widow or widower into a much higher tax bracket. Some strategies, like Roth conversions while both spouses are alive or drawing down IRAs earlier than required, can be considered to reduce the future tax burden on the survivor.

• Roth advantage: By contrast, qualified withdrawals from a Roth IRA do not count as taxable income. They won’t increase your tax bracket or affect Social Security taxation. Moreover, since Roth IRAs have no RMDs, you have complete control – you can take out as much or as little as you want from a Roth in retirement (or nothing at all), which can help with tax planning.
• Withholding and estimated taxes: RMDs can significantly increase your tax liability for the year. You may want to have federal (and state) taxes withheld from your RMDs to cover the bill or adjust your quarterly estimated tax payments. The IRS does impose penalties if you underpay your taxes throughout the year, so don’t get caught off guard by a big RMD-related tax bill.

Strategies to Manage RMDs and Roth IRA Withdrawals

Managing RMDs and withdrawals efficiently can help you minimize taxes and make your retirement savings last longer. Here are some strategies and tips that retirees use:

Strategic Roth Conversions

Consider converting some traditional IRA funds to a Roth IRA in your early retirement years, before RMDs start. This can reduce future RMDs and taxable income. By paying some tax now (often at a lower bracket) on the converted amount, you potentially lower the tax hit later and get more money into a Roth (which has no RMDs and offers tax-free withdrawals). Always consult a tax advisor to plan conversions wisely.

Qualified Charitable Distributions (QCDs)

If you are charitably inclined and over age 70½, you can transfer up to $100,000 per year directly from your IRA to a qualified charity. This is known as a QCD. QCDs count toward your RMD but are not included in your taxable income. It’s a fantastic way to satisfy RMD requirements while reducing your tax bill and supporting a charity. (The $100k annual limit is now indexed for inflation – for instance, it’s $108,000 for 2025.)

Time Your First RMD Wisely

You have a choice to take your first RMD in the year you reach the starting age or delay it until the first quarter of the following year (before the RBD). Plan ahead and decide which timing is more tax-efficient. Taking two RMDs in one calendar year could bump you into a higher bracket, but in some cases delaying the first withdrawal (and then taking two in one year) might be beneficial if your income will drop in retirement. Evaluate your income projections for both years to make the best decision.

Other tips for managing RMDs and withdrawals:

• Consolidate accounts: If you have multiple traditional IRAs, consider consolidating them into one IRA to simplify RMD calculations and withdrawals. With fewer accounts, you reduce the risk of forgetting an RMD. (Remember, you can’t consolidate RMDs across different types of accounts, but you can streamline the number of accounts you deal with. You might also roll old 401(k)s into an IRA to manage one pool for RMDs.)

• Reinvest or repurpose RMD funds: If you don’t need the RMD money for living expenses, you can reinvest it in a taxable brokerage account to keep it growing (you’ll pay taxes on any interest, dividends, or gains going forward, but at least the money stays invested). Or use the RMD to fund a Roth IRA contribution for yourself or even for a spouse or grandchildren, if eligible – effectively turning a required withdrawal into future tax-free growth (subject to contribution limits and having earned income).

• Take advantage of the work exception: If you’re still working at 73+ and your employer’s 401(k) plan allows RMDs to be deferred for active employees, you might delay RMDs on that 401(k) and perhaps roll other IRA money into the 401(k) to postpone those RMDs too. This strategy isn’t for everyone, but it’s a potential way to reduce taxable income in your early 70s.

• Stay organized and compliant: Keep track of all your retirement accounts and when RMDs start for each. Each year, ensure the total RMD has been withdrawn. If you ever withdraw more than the minimum in a given year, note that the extra amount does not count toward next year’s RMD – you can’t “carry over” or pre-pay RMDs. Every year’s RMD obligation stands alone. When in doubt, consult your IRA custodian or a financial advisor to make sure you’re on track.

Recent Changes to RMD and Roth Rules (SECURE Act Updates)

Retirement account rules have seen significant changes in recent years due to legislation. Here are some key updates that impact RMDs, RBDs, and Roth accounts:

2019 – SECURE Act (Effective 2020)

The original SECURE Act raised the starting age for RMDs from 70½ to 72, giving retirees extra time before mandatory withdrawals. It also eliminated the “stretch IRA” for most beneficiaries; now, most non-spouse heirs who inherit an IRA must withdraw all assets within 10 years (the new 10-year rule) instead of over their lifetime. Additionally, the SECURE Act removed the age limit (formerly 70½) for making contributions to a traditional IRA, so you can contribute at any age if you have earned income.

2022 – SECURE Act 2.0 (Effective 2023+)

SECURE Act 2.0 further raised the RMD age to 73 starting in 2023, and it schedules another increase to age 75 for those born in 1960 or later (effective in 2033). It reduced the penalty for missed RMDs from 50% to 25% (and to 10% if the mistake is corrected in a timely manner). Starting in 2024, the law also removed RMD requirements for Roth 401(k) accounts during the owner’s lifetime, making them similar to Roth IRAs. SECURE 2.0 also expanded QCD rules by indexing the $100k annual limit for inflation (meaning this limit will increase over time) and provided more flexibility for certain surviving spouses inheriting retirement accounts (allowing them to delay inherited RMDs in some cases).

What these changes mean (as of 2025): With the RMD beginning age now at 73 (and eventually 75 for younger folks), retirees have more flexibility and can keep their money in tax-deferred accounts a bit longer. If you are approaching your early 70s, be sure to check what the current RMD start age is for you. For example, anyone turning 73 in 2025 will need to take their first RMD by April 1, 2026 (or take it in 2025 to avoid doubling up in 2026). The elimination of RMDs for Roth 401(k)s means that if you leave money in a Roth 401(k), you no longer have to worry about RMDs from that account either. And if you’re using QCDs for charitable giving, note that the $100,000 limit will begin to increase over time due to inflation adjustments (e.g., slightly over $100k in future years).

Rules can continue to evolve, so it’s wise to stay updated on any new legislation or IRS regulations that affect retirement accounts.

Conclusion

Managing your retirement accounts within the rules—understanding when and how you must take money out—will help you avoid costly penalties and make the most of your hard-earned savings. In summary, know the basics: when RMDs start (age 73 for most, as of now), how the first RMD’s timing works (RBD by April 1 of the next year), what the Roth IRA 5-year rule means for your tax-free withdrawals, and the fact that Roth IRAs let you sidestep RMDs entirely during your life. Use that knowledge to plan ahead. For instance, you might implement strategies like Roth conversions or QCDs to reduce the impact of RMDs, or simply be mindful of withholding enough taxes on those distributions.

By staying informed and planning appropriately, you can navigate the IRA rules with confidence and enjoy your retirement with peace of mind. Remember that while these guidelines apply generally, everyone’s financial situation is unique.

Always consider consulting a qualified financial planner or tax advisor to get advice tailored to your individual circumstances. They can help ensure you’re meeting all requirements and making the best decisions for your retirement.

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(This blog post is for informational purposes only and not legal or financial advice. Consult with a professional advisor for advice specific to your situation.)