RMDs: The Withdrawals You Can’t Refuse (and How to Take Them on Your Terms)

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Decades of “tax-deferred” comes due on a schedule: at age 73 (rising to 75 for younger cohorts), required minimum distributions begin — the IRS’s insistence that the partnership finally pay out its share. The rules are mechanical; the planning is anything but.

The mechanics

Each year’s RMD = prior December 31 balance ÷ the IRS life-expectancy factor for your age (the Uniform Lifetime table for most; a friendlier joint table if your spouse is 10+ years younger). At 73 the divisor is ~26.5 — roughly 3.8% of the balance, rising each year. RMDs apply to traditional IRAs, SEP/SIMPLEs, and workplace plans; Roth IRAs never have lifetime RMDs (and Roth 401(k)s no longer do either). IRA RMDs can be aggregated and taken from any one IRA; 401(k) RMDs cannot — each plan pays its own, a consolidation argument by itself.

The deadlines and the trap

RMDs are due by December 31 — except your very first, which may be delayed to April 1 of the following year. The trap: delaying stacks two RMDs into that second year, inflating the bracket, Social Security taxation, and IRMAA at once. Usually take the first one in its own year; model it, don’t default.

The penalty for a missed RMD is now 25% of the shortfall — dropping to 10% if corrected promptly, and the IRS routinely waives it entirely for reasonable cause with a Form 5329 request and a corrected withdrawal. Missed RMDs are common (inherited accounts, forgotten old 401(k)s) and very fixable; panic is optional, the paperwork isn’t.

Taking them on your terms

  1. QCDs first. Charitable and 70½+? Qualified charitable distributions satisfy the RMD without touching your income — the single best RMD tool for giving households (full guide separately). Sequence matters: QCDs must come out before the RMD is otherwise satisfied.

  2. Use the withholding superpower. Tax withheld from an RMD is treated as paid evenly all year — a December RMD with heavy withholding can cure an entire year’s estimated-tax shortfall retroactively. Many retirees run their whole tax-payment system through one year-end RMD on purpose.

  3. In-kind distributions: you must withdraw value, not sell conviction — securities can transfer to taxable intact (basis resets to distribution-date value).

  4. Timing within the year is yours: monthly for cash flow, early-year to be done, late-year for maximum deferral and the withholding play.

  5. Still working at 73? The current employer’s 401(k) can wait until retirement (if the plan allows and you’re not a 5% owner) — and old IRAs rolled into that plan ride the exception too.

The real strategy happens earlier

By RMD age, the size of the problem is set. The decade before — Roth conversions in the gap years, QCD-ready giving plans, asset location that puts slower growth in traditional accounts — is where large future RMDs get shrunk. If your projected RMDs exceed your spending needs, that’s not a bonus; it’s a signal the conversion window is being wasted. The best RMD plan is the one that made them boring.

Romanchuk CPA LLC is a fully virtual CPA firm serving individuals, families, and business owners nationwide since 2014, with NJ/NY depth. Book a consultation at rfg.tax.

This article is general information, not tax advice for your specific situation. Figures adjust annually — verify current amounts.