How to Calculate Required Minimum Distributions

To calculate a required minimum distribution, divide the account balance on December 31 of the prior year by the life expectancy factor in the IRS Uniform Lifetime Table that corresponds to your current age. The result is your annual RMD. This applies to traditional traditional-iras, 401k-plans, and most other tax-deferred retirement accounts once you reach age 73.

The Basic Formula

The required minimum distribution calculation is straightforward:

RMD = Account balance (Dec 31 of prior year) ÷ Life expectancy factor

For example, suppose you turn 75 this year and your traditional IRA balance on December 31 last year was $300,000. The IRS Uniform Lifetime Table shows a life expectancy factor of 22.9 for age 75. Your RMD is:

$300,000 ÷ 22.9 = $13,101

You must withdraw at least $13,101 by December 31 of this year. You may withdraw more, but not less, without incurring a penalty.

The IRS Uniform Lifetime Table

The Uniform Lifetime Table is the default life-expectancy schedule used for most RMD calculations. The IRS publishes it annually (it changes slightly year to year). Here are sample factors:

The factor decreases as you age, which means your RMD increases over time (assuming the account balance doesn’t shrink faster than the factor does). At age 100, you must distribute about 18% of your balance annually. This is by design: the IRS assumes you are nearing the end of life and wants assets distributed before death (to tax them).

Step-by-Step Calculation

Step 1: Identify all your retirement accounts. Write down every traditional IRA, SEP-IRA, SIMPLE IRA, and 401(k) that you own or have inherited. Each has its own RMD.

Step 2: Get the December 31 prior-year balance for each. Your custodian (Fidelity, Vanguard, Schwab, your 401(k) plan administrator) sends you a statement or account summary in January. This balance is your withdrawal basis.

Step 3: Find your life expectancy factor. Determine your age on December 31 of this year (the year of the withdrawal). Look up that age in the Uniform Lifetime Table published by the IRS. Find your factor.

Step 4: Divide balance by factor. This is your RMD for the year.

Step 5: Make the withdrawal(s) by December 31. You can withdraw the RMD in a lump sum, monthly installments, or any schedule that hits the annual total by year-end. If you have multiple accounts, you can aggregate IRAs and pay the total from one IRA; 401(k)s typically must be withdrawn separately (though some custodians allow aggregation).

Step 6: Report the distribution on Form 1040. The RMD is taxable income at your ordinary marginal-tax-rate-investor. Your custodian issues a Form 1099-R; you enter the total on your tax return.

Multiple Accounts and Aggregation

If you own three traditional IRAs, you calculate the RMD for each separately. However, the IRS allows you to aggregate the RMDs across all your traditional IRAs and withdraw the combined total from one IRA. This is useful if one account is in stocks and another in cash; you can avoid forced liquidation by withdrawing from the cash account.

Crucially: 401(k)s cannot be aggregated with IRAs. If you have a 401(k) and an IRA, calculate and withdraw them separately. If you have multiple 401(k)s (e.g., from different employers), some plans may allow aggregation, but it’s plan-specific; check your plan administrator.

Inherited accounts: If you inherited an IRA or 401(k), the RMD calculation is different and depends on whether you are a spouse or non-spouse beneficiary and the date of the original account holder’s death. Consult IRS Publication 590-B or a tax professional.

The Prior-Year Balance Snapshot

A critical detail: you use the previous year’s December 31 balance, not the current balance. This prevents people from gaming the system by withdrawing funds right before December 31 to reduce that year’s RMD.

Example: Your IRA balance on December 31, 2024 is $400,000. You turn 75 in 2025. Your 2025 RMD is based on the $400,000 (not whatever the balance is on December 31, 2025). You must withdraw your RMD by December 31, 2025, regardless of what the market does that year.

This also means you should plan RMD withdrawals by early December at the latest—don’t wait until December 31. Markets can be volatile, and you want to ensure you hit your withdrawal target without scrambling at year-end.

Penalties for Shortfall

If you fail to withdraw your full RMD by December 31, the IRS imposes an excise tax. As of 2023, the penalty is 25% of the amount not withdrawn. If your RMD was $13,101 and you withdrew only $10,000, the shortfall is $3,101; you owe 25% × $3,101 = $775 (plus ordinary income tax on the amount you did withdraw). This is in addition to any other tax consequences.

The IRS may waive the penalty if you can prove “reasonable cause”—for example, you were incapacitated, the custodian made an error, or you misunderstood the rule. But waivers are discretionary; don’t count on them. Set a calendar reminder for November.

Strategies to Minimize Tax Burden

Qualified charitable distributions. If you are over 70½, you can instruct your IRA custodian to send up to $100,000 per year directly to a charity. This counts as your RMD but is not treated as taxable income to you. This is the best use of an RMD if you are charitably inclined.

Bunching withdrawals. If your income varies year to year, you might withdraw less in low-income years and more in high-income years. However, RMDs are mandatory, so you cannot skip a year; you must withdraw at least the annual amount.

Roth conversion ladder. Some people convert portions of their traditional IRA to a roth-ira before RMD age. This reduces the traditional IRA balance and thus future RMDs. Conversions are taxable in the year you do them, but they can spread the tax burden and leave more of your account compounding tax-free in the Roth.

Delay if still working. If you are still employed and do not own more than 5% of your employer’s stock, you may be able to delay RMDs from that employer’s 401(k) until you retire. IRAs have no “still working” exception; RMDs begin at 73 regardless of employment status.

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