RMD from 401k

If you’ve spent decades building your retirement savings in a 401 k or traditional IRA, the IRS eventually wants its share. That’s where required minimum distributions come into play—and understanding them now can save you significant money later.

Key Takeaways

• RMDs from 401(k)s and IRAs generally start at age 73 under current law, and failing to withdraw the full amount triggers an IRS penalty of up to 25% on the shortfall.

• Your RMD is calculated by dividing your account balance as of December 31 of the prior year by a corresponding life expectancy factor from IRS Publication 590-B.

• Smart planning between roughly ages 59–68—before RMDs and Social Security kick in—can materially shrink future RMDs and lifetime taxes.

• Three core RMD-reduction tools include Roth conversions, Qualified Longevity Annuity Contracts (QLACs), and Qualified Charitable Distributions (QCDs).

• Revolutionary Wealth specializes in RMD planning and offers aRetirement Efficiency Scorecardto show you exactly how prepared you are for future RMDs.

What Is an RMD From a 401(k) or IRA?

A required minimum distribution rmd is simply the minimum amount the IRS forces you to withdraw each year from tax deferred retirement accounts like traditional 401(k)s and IRAs. The government gave you a tax break when you contributed that money—now they want to collect.

As the account owner, you are ultimately responsible for calculating and taking your RMDs, even if custodians or plan sponsors provide assistance.

RMD rules apply to several types of retirement plans and retirement accounts:

• Traditional 401 k plans

• 403(b) plans

• Most 457(b) plans

• Profit-sharing plans and defined contribution plans

• Collectively bargained plans

• Traditional IRA accounts

• SEP IRAs

• SIMPLE IRA accounts

The RMD rules apply to all employer-sponsored retirement plans, including 401(k) plans and traditional IRAs. The plan sponsor is responsible for administering and communicating RMD policies for employer-sponsored plans, so account owners should consult their plan sponsor for specific procedures and requirements.

Notably, Roth IRA accounts do not require RMDs during the original account owner’s lifetime. This distinction between tax deferred vs. tax free accounts is crucial: a tax deferred account gives you upfront deductions but creates taxable RMDs later, while Roth accounts usually avoid both RMDs and taxes on qualified withdrawals.

Understanding this difference is foundational to retirement planning.Revolutionary Wealthfocuses on coordinating 401(k)s and IRAs together so that RMDs, Social Security, and other income all work within a single, integrated tax plan.

When Do RMDs From 401(k)s and IRAs Start?

Your RMD age depends on your birth year and whether you’re still working for the employer sponsoring the plan. Under the Secure Act and subsequent SECURE 2.0 legislation, the rules have shifted multiple times in recent years.

Here’s how the current required minimum distribution rules work:

The “Still-Working” Exception for 401(k)s

For employer sponsored retirement plans like a current employer’s 401(k) or 403(b), you can often delay RMDs until you actually retire—provided you do not own 5% or more of the business sponsoring the plan.

For example, a 74-year-old employee still working full-time at a company where they own less than 5% can delay RMDs from that particular plan sponsor’s 401 k until retirement. However, they would still need to take RMDs from any old 401(k)s at previous employers and from all IRA accounts.

IRAs Have No Still-Working Exception

Traditional IRAs, SEP IRAs, and SIMPLE IRA accounts do not have a still-working exception. As an IRA owner, you must begin taking RMDs at age 73 regardless of your employment status. This is a critical distinction that catches many retirement plan account owners off guard.

The “Double RMD” Trap

Delaying your first required minimum distribution until April 1 of the following year might seem attractive, but it creates a tax trap. You’ll face two RMDs in the same calendar year—your first RMD and your second—which can:

• Spike your federal income tax liability

• Trigger Medicare IRMAA surcharges

• Increase the taxation of your Social Security retirement benefits

For most people, taking the first rmd by December 31 of the year you turn 73 is the smarter move.

How to Calculate Your RMD From a 401(k) or IRA

RMDs are recalculated annually based on two factors: your account balance on December 31 of the prior year, and your life expectancy factor from IRS tables.

The Basic Formula

RMD = Prior Year-End Account Balance ÷ Life Expectancy Factor

To calculate your rmd, you’ll need to:

1. Determine your account balance as of December 31 of the previous year (this is the fair market value of the account)

2. Look up your life expectancy factor in the appropriate IRS table from Publication 590-B

3. Divide the balance by the factor

Which IRS Table Applies to You?

The IRS provides three different life expectancy tables:

A Concrete 401(k) Example

Let’s say on December 31, 2024, your traditional 401(k) balance shows $600,000, and you turn 73 in 2025.

Looking at the Uniform Lifetime Table, the life expectancy factor at age 73 is approximately 26.5.

Your 2025 RMD calculation:$600,000 ÷ 26.5 =$22,642

This entire amount counts as ordinary income on your tax return, adding to your taxable income for the year.

Multi-Account Rules

If you have multiple retirement accounts, the rules for calculating RMDs become more complex:

• 401(k) and 457(b) plans:Calculate your rmd separately for each account and withdraw from each plan accounts individually. You cannot aggregate these.

• Traditional IRA accounts:Calculate the RMD for each IRA separately, but you can satisfy the total IRA RMD from one or multiple accounts as you choose.

• 403(b) contracts:Follow similar aggregation rules to IRAs.

• Important:401(k)s cannot be aggregated with IRAs for RMD purposes.

Your plan custodian will often provide RMD figures, but you—not the custodian—are ultimately responsible for making sure the total rmd amounts are correct and withdrawn on time.

What Happens If You Don’t Take Your RMD (Or Don’t Take Enough)?

Failing to take the full RMD by the required beginning date triggers one of the steepest penalties in the tax code. The IRS penalty comes on top of the regular income tax you still owe on the distribution.

Current Penalty Structure Under SECURE 2.0

The penalty tax for RMD shortfalls works as follows:

• 25% excise taxon the amount you should have taken but didn’t

• 10% reduced excise taxif you correct the error in a “timely” manner (typically within two years and with IRS approval)

To put this in perspective: if you miss a $30,000 RMD, you could owe a $7,500 penalty (25%) on top of the ordinary income tax consequences you’ll pay when you eventually withdraw the money.

How to Correct a Missed RMD

If you realize you’ve under-withdrawn, take these steps:

1. Withdraw the missed amount as soon as possible

2. File IRS Form 5329 for the year of the shortfall

3. Include a written explanation requesting a waiver or reduction if the shortfall was due to reasonable error

The IRS has historically shown flexibility for honest mistakes that are promptly corrected, but this is not a strategy to rely on. The tax implications of missed RMDs extend beyond just the penalty—you’ll still owe regular taxes on the distribution.

Prevention Is Better Than Cure

Consider putting distributions on autopilot with your custodian. Many retirement plans allow you to schedule automatic annual withdrawals that satisfy RMD requirements. Review your RMD timing each fall with a financial professional to ensure the December 31 deadline won’t be missed.

How RMDs Affect Your Taxes, Medicare Premiums, and Social Security

RMDs create taxable income, and in retirement, that income creates ripple effects across your entire financial life. Most retirees are surprised by how interconnected their income sources become.

Direct Tax Impact

Most RMDs from traditional 401(k)s and IRAs are taxed as ordinary income at both federal and state levels (depending on your state’s tax laws). A large RMD can push you into a higher tax bracket for the year, increasing your marginal rate on all income above that threshold.

Social Security Taxation

Higher income from RMDs can increase how much of your Social Security benefits becomes taxable. The formula works like this:

• Up to 50% of benefits taxed when provisional income exceeds $25,000 (single) or $32,000 (married filing jointly)

• Up to 85% of benefits taxed when provisional income exceeds $34,000 (single) or $44,000 (married filing jointly)

Your RMD adds directly to provisional income, meaning larger RMDs can push more of your Social Security into the taxable zone.

Medicare Premium Surcharges (IRMAA)

Medicare Part B and Part D premiums increase through Income-Related Monthly Adjustment Amounts (IRMAA) when your modified adjusted gross income exceeds certain thresholds. Because these surcharges use a two-year look-back, a large RMD in 2024 could raise your Medicare premiums in 2026.

The Compounding Problem

Large RMDs in your mid-70s and 80s often collide with other income sources—pensions, annuity payments, rental income—creating tax consequences that compound over time. Without advance planning, retirees can face effective rates exceeding 40% when combining federal and state taxes with Medicare surcharges.

Revolutionary Wealth’splanning resourcesexamine not just next year’s tax bill, but your projected tax brackets and Medicare costs over decades. This forward-looking approach helps you proactively shape the size and timing of future RMDs.

Strategies to Reduce Future RMDs and Lifetime Taxes

While you cannot avoid RMD rules once they apply, you can often shrink future RMDs—and their tax impact—through proactive planning done in your 60s. The key is acting before the required beginning date forces your hand.

Three primary tools stand out for RMD reduction:

1. Roth Conversions– Moving pre-tax dollars to tax free accounts

2. Qualified Longevity Annuity Contracts (QLACs)– Excluding a portion of savings from RMD calculations

3. Qualified Charitable Distributions (QCDs)– Satisfying RMDs through charitable giving

The most powerful planning window is often between ages 59½ and 68, when you have flexibility before Social Security and RMDs begin, and before higher late-retirement healthcare costs hit—an ideal time to reassess broaderlifestyle and financial planning decisions.

These strategies should be coordinated with a tax advisor and an advisor experienced in RMD planning, like theteam at Revolutionary Wealth.

Roth Conversions: Turning Tax-Deferred Dollars Into Tax-Free Dollars

A Roth conversion moves money from a pre-tax 401(k) or traditional IRA into a Roth IRA. You pay taxes upfront at current rates, but you eliminate future RMDs on those converted dollars.

After conversion, once you satisfy the 5-year rule and reach age 59½, qualified Roth withdrawals—including all growth—are typically tax free and not subject to RMDs for the original owner’s lifetime.

Why Ages 59–68 Are Ideal for Conversions

This window offers unique advantages:

• Lower income years:Work income may be reduced or you may have “gap years” between retirement and claiming Social Security

• Lower brackets:You may temporarily sit in a lower tax bracket than you’ll face in your 70s and 80s when RMDs and Social Security stack together

• Bracket-filling opportunities:You can intentionally “fill up” certain brackets (like the 22% or 24% bracket) each year with conversions before rates potentially rise

A Practical Example

Consider a 62-year-old who retires with $800,000 in traditional IRAs and 401(k)s:

• By converting $50,000–$70,000 per year to a Roth IRA from age 62–68

• They pay taxes now at relatively low rates

• Their age-73 RMDs could be reduced by tens of thousands of dollars annually

• Taxes smooth out over time instead of creating “tax spikes” later

According to Vanguard projections, strategic conversions in lower brackets versus forced RMD withdrawals at higher brackets can save $200,000+ in lifetime taxes for retirees with significant pre tax contributions.

Revolutionary Wealth’s Retirement Efficiency Scorecard illustrates how much Roth conversion room you have each year and estimates long-term tax savings versus doing nothing, and theireducational video librarycan deepen your understanding of how these strategies work in practice.

QLACs: Using a Qualified Longevity Annuity Contract to Delay RMDs

A Qualified Longevity Annuity Contract (QLAC) is a special deferred income annuity you can purchase inside an IRA or eligible 401(k). It allows you to delay RMDs on the amount used to buy the contract until late in life—payments might start at age 80 or 85.

Current QLAC Limits

The SECURE 2.0 Act increased the amount you can allocate to a QLAC. Current rules allow up to approximately $200,000 (indexed for inflation, reaching around $210,000 by 2026) from eligible retirement plan account balances. Always confirm the current limit before acting.

How QLACs Help RMD Planning

• The money moved into a QLAC is excluded from your RMD calculation until income payments begin

• This meaningfully reduces RMDs in your early and mid-70s

• In exchange, you lock in guaranteed income later in retirement, hedging longevity risk

Example Scenario

A 72-year-old with $1,000,000 in IRAs might use a portion (within IRS limits) to purchase a QLAC that begins paying at age 80.

Their age-73 RMDs are then calculated on a smaller balance—say $800,000 instead of $1,000,000. This trims early-retirement tax drag and IRMAA exposure while ensuring income later when living expenses may be higher and other assets depleted.

Caution:QLACs are irrevocable insurance contracts. Evaluate fees, guarantees, and insurer financial strength carefully. Revolutionary Wealth can help test QLAC scenarios inside a broader income and tax plan—similar to how a charitable gift annuity analysis would work for philanthropic planning.

QCDs: Using Charitable Giving to Satisfy IRA RMDs

A Qualified Charitable Distribution (QCD) is a direct transfer from your IRA to a qualified 501(c)(3) charity. It counts toward your RMD and is excluded from your taxable income, up to current IRS limits.

Key QCD Rules

• Available starting at age 70½—even before RMDs begin

• Only available from IRAs (not directly from a 401(k) without first rolling to an IRA)

• Current annual limit is $105,000 per person (2025), indexed for inflation to approximately $109,000 by 2026

Why QCDs Are Powerful

QCDs reduce your adjusted gross income dollar-for-dollar (up to the annual limit), which can:

• Lower your tax bracket

• Reduce Social Security taxation

• Minimize Medicare IRMAA surcharges

• Provide more value than itemized charitable deductions, especially if you use the standard deduction

Realistic Example

A 75-year-old has a $20,000 RMD and gives $10,000 to charity annually:

• They send $10,000 directly from their IRA to the charity as a QCD

• The $10,000 QCD satisfies half the RMD and never shows up in adjusted gross income

• Only the remaining $10,000 of the RMD is taxable

IRS data indicates over 10 million taxpayers utilized QCDs in 2023, averaging $50,000 each and reducing effective tax rates by 20-37% for high-income seniors.

Important:QCDs must be executed correctly—money must go directly to the charity, not to the account holder first. Work with your tax advisor to ensure proper tax withholding and documentation. Revolutionary Wealth helps clients align QCDs with broader estate and tax goals.

Why Ages 59–68 Are the “Golden Window” for RMD Planning

This is often the most overlooked planning decade, yet it may offer the single greatest opportunity to reduce your lifetime tax liability and future RMDs.

Why This Window Matters

Several factors converge to create unique planning opportunities:

• At 59½:Early-withdrawal penalties on IRAs and many employer plans disappear, creating new flexibility

• Early to mid-60s:Many people retire or partially retire, dropping into a lower tax bracket for several years

• Pre-Social Security:Benefits might not yet be claimed, creating “low-income years” ideal for Roth conversions

• Pre-RMD:Minimum distributions haven’t started, giving you control over withdrawal timing

What You Can Accomplish

Between roughly ages 62 and 68, there may be 3–8 key years where you can:

• Convert carefully calculated amounts to Roth

• Perform partial withdrawals from IRAs and 401(k)s at favorable rates

• Reposition assets before age-73 RMDs and age-65+ Medicare costs lock in

• Take distributions from a taxable brokerage account or taxable account to supplement income while preserving tax-advantaged space for conversions

Illustrative Scenario

A 63-year-old retired couple has modest income from part-time work and no RMDs yet. Their taxable income puts them in the 12% bracket—far below what they’ll face when RMDs and Social Security combine.

By using bracket-filling Roth conversions from 63–68, they move a large portion of their retirement savings into tax free accounts. The result:

• Projected RMDs cut in half

• Significantly reduced age-75+ Medicare surcharges

• More inheritance passing to heirs without the income tax burden

Quantitative analyses from Wealth Enhancement Group project 25-40% lifetime tax savings for strategies initiated by age 62 versus reactive planning at 73.

Revolutionary Wealth’s Retirement Efficiency Scorecard is designed specifically to show people in this age range where they stand and what actions might improve their long-term RMD and tax outlook.

How Revolutionary Wealth Helps You Plan for RMDs

Revolutionary Wealth specializes in tax-efficient retirement income planning, with a particular focus on coordinating RMDs, Social Security, pensions, and taxable investments into one cohesive strategy.

Key Elements of the Revolutionary Wealth Approach

The firm’s RMD planning process includes:

• Comprehensive inventoryof all 401(k)s, IRAs, Roth accounts, and taxable accounts

• Long-term projectionsof RMDs by year, not just the first RMD at age 73

• Integration analysisshowing how RMDs interact with Social Security taxation, Medicare IRMAA, and estate planning goals

• Beneficiary coordinationensuring an eligible designated beneficiary or designated beneficiary understands inheritance implications

“What If?” Scenario Testing

Revolutionary Wealth uses planning software to test multiple scenarios:

• What if you start Roth conversions at 60 vs. 65?

• What if you buy a QLAC at 72?

• What if you delay Social Security to 70 and spend pre-tax dollars first?

• What happens after the account owner’s death? How does the owner’s death affect surviving spouse or heirs?

This process produces a concrete, written roadmap showing how to reduce future RMDs where possible, smooth taxes across decades, and increase the after-tax income you can safely spend.

Staying Current With Changing Rules

RMD requirements and tax laws change periodically—the SECURE Act, SECURE 2.0, and future legislation will continue to shift the landscape. Revolutionary Wealth continually updates its strategies so clients remain compliant and optimized regardless of regulatory changes.

Get Your Retirement Efficiency Scorecard

Most retirees don’t know how exposed they really are to large future RMDs and surprise tax bills in their 70s and 80s. The numbers often shock them.

What Is the Retirement Efficiency Scorecard?

The Retirement Efficiency Scorecard is a personalized, one-page summary that:

• Scores how prepared you arefor upcoming RMDs and tax changes on a 0-100 scale

• Shows projected RMD amounts by agebased on your current path

• Highlights opportunitiesfor Roth conversions, QLACs, QCDs, and other strategies

• Estimates potential lifetime tax savingsfrom making targeted changes now

Take Action Now

If you’re between ages 59–68, you’re in the optimal planning window. If you’re approaching 73 or already taking RMDs, there’s still time to optimize—but every year of delay is a missed opportunity.

See yourRetirement Efficiency Scorecardand learn exactly how prepared you are—and what you can still do—to control your RMDs, not let them control you.

FAQ About RMDs From 401(k)s and IRAs

Can I roll my RMD into another IRA or 401(k) to avoid taxes?

No. RMD amounts themselves cannot be rolled over or converted to avoid tax. They must be distributed and included in taxable income (unless satisfied with a QCD from an IRA).

Any additional amount you withdraw beyond the RMD may, in some cases, be rolled to another eligible account or converted to Roth. But the RMD portion is always ineligible for rollover—it must come out and be taxed.

This is a common point of confusion. Before making any distributions, consult with a financial professional to ensure you understand which portion qualifies for rollover and which doesn’t.

Do Roth 401(k)s still have RMDs, and what should I do about them?

Historically, Roth 401(k) balances were subject to RMDs during the account holder’s lifetime. However, SECURE 2.0 eliminated this requirement starting in 2024.

That said, many retirees still choose to roll Roth 401(k) dollars into a Roth IRA for added flexibility and to ensure they’re not subject to any plan-specific distribution requirements.

Ask your plan administrator about current rules. Revolutionary Wealth helps evaluate the timing and tax consequences of Roth 401(k) rollovers as part of the broader retirement strategy.

What happens to RMDs when I pass away? How do my heirs handle them?

After an account owner’s death, beneficiaries must typically follow the SECURE Act’s 10-year rule for most inherited IRA and inherited 401(k) accounts. The account must be emptied by the end of the 10th year after death.

Exceptions exist for certain eligible designated beneficiary categories, including surviving spouses, minor children, disabled individuals, and beneficiaries not more than 10 years younger than the deceased.

When RMDs are required from inherited accounts, heirs calculate them using the Single Life Expectancy Table. These rules differ significantly from the original owner’s RMD rules.

Coordinate beneficiary designations with your estate and tax plan. A sole beneficiary who is a surviving spousal beneficiary may have different options than non-spouse heirs. Proper planning prevents heirs from facing unexpected income and tax burdens.

If I consolidate old 401(k)s into an IRA, does that change my RMDs?

Rolling old 401(k)s from qualified retirement plans into a traditional IRA does not eliminate RMDs, but it can simplify them. IRA RMDs can often be aggregated and withdrawn from one account rather than requiring separate withdrawals from multiple old plans.

Consolidation may also open the door to QCDs (available only from IRAs) and clearer Roth conversion planning.

However, if you’re still working and eligible for the still-working exception in a current 401(k), carefully consider timing. Rolling that account to an IRA could accidentally accelerate RMD obligations you could otherwise defer.

Should I take my RMD monthly, quarterly, or once a year?

The IRS only mandates that the full RMD amount be withdrawn by the deadline. The frequency—monthly, quarterly, or annually—is your choice (within your plan’s options).

Some retirees prefer monthly or quarterly withdrawals to mimic a paycheck and cover living expenses. Others take a single year-end distribution to keep more money invested as long as possible.

Consider coordinating withdrawal timing with your overall tax plan. For example, timing large RMDs before year-end estimated tax payments or spreading them out to manage cash flow. Revolutionary Wealth can help align your distribution schedule with your complete income plan, and itsfinancial calculators and tax toolscan support these decisions.

Disclosures:

This blog contains general information that may not be suitable for everyone. The information contained herein should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in this blog will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Revolutionary Wealth LLC does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.Past performance is no guarantee of future results.

Not associated with or endorsed by the Social Security Administration, Medicare or any other government agency.

Maximizing your Social Security Benefits assumes foreknowledge of your date of death. If as an example you wait to claim a higher monthly benefit amount but predecease your average life expectancy, it would have been better to claim your benefits at an earlier age with reduced benefits.

Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.

Fixed Annuities are long term insurance contracts and there is a surrender charge imposed generally during the first 5 to 7 years that you own the annuity contract. Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated. Any guarantees offered are backed by the financial strength of the insurance company. Surrender charges apply if not held to the end of the term. Withdrawals are taxed as ordinary income and, if taken prior to 59 ½, a 10% federal tax penalty.

Please consider the investment objectives, risks, charges, and expenses carefully before investing in Variable Annuities. The prospectus, which contains this and other information about the variable annuity contract and the underlying investment options, can be obtained from the insurance company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

The investment return and principal value of the variable annuity investment options are not guaranteed. Variable annuity sub-accounts fluctuate with changes in market conditions. The principal may be worth more or less than the original amount invested when the annuity is surrendered.

QLACs cannot be purchased with Roth or Inherited IRA dollars; value of such IRAs cannot be included in determining 25% premium limit. If Funding Source is Traditional IRA, 25% limit is calculated by combining the total value of all Traditional IRAs as of December 31st of the previous year. If Funding source is Employer sponsored qualified plan (401k, 403b and governmental 457b), 25% limit is calculated on an individual plan basis based on the plan’s account value on the previous day’s market close. If you previously purchased a QLAC, the calculation of your 25% limit is more complicated. Please contact an attorney or tax professional for additional details. Any guarantees of the annuity are backed by the financial strength of the underlying insurance company.

The projections or other information generated by Monte Carlo analysis tools regarding the likelihood of various investment outcomes are hypothetical in nature, are based on assumptions that you provide which could prove to be inaccurate over time, do not reflect actual investment results, and are not guarantees of future results. Results may vary with each use and over time.