Traditional 401(k)s, traditional IRAs, and similar pretax retirement accounts let contributions grow tax-deferred for decades, but the deferral is not indefinite. Starting at a specific age, the IRS requires you to withdraw a minimum amount each year, called a required minimum distribution, and pay ordinary income tax on it, whether or not you actually need the money to live on that year.
Why RMDs Exist
The government allowed the tax deduction on contributions and let the balance compound without annual taxation as an incentive to save, but it eventually wants its tax revenue. Without a required distribution, a traditional account could theoretically grow tax-deferred for a person's entire life and pass to heirs having never been taxed at the account owner's rate. RMDs force the deferred tax to actually get collected once the account holder reaches a set age, rather than letting the deferral run indefinitely.
How the Age Threshold Works
The age at which RMDs must begin has shifted upward in recent legislation and now generally starts in the early seventies, with the exact age depending on your birth year. The first distribution has a deadline that falls in the spring of the year after you reach the required age, though taking it in that window means two distributions could land in the same calendar year if you delay the first one to its latest allowed date, which can push you into a higher tax bracket for that year. Most people are better off taking the first RMD in the actual year they become eligible rather than delaying it to the following spring.
How the Amount Is Calculated
The required distribution is not a flat percentage. It is calculated by dividing the account balance as of December 31 of the prior year by a life expectancy factor published in IRS tables, which is based on your age each year. As you get older, the divisor shrinks, meaning the required percentage withdrawn increases each year, which is a mechanical way of ensuring the account eventually gets substantially depleted or fully distributed over your remaining life expectancy rather than the withdrawals staying flat indefinitely.
Multiple Accounts Complicate the Calculation
If you hold several traditional IRAs, the RMD for each is calculated separately but can be withdrawn from any one or combination of those IRA accounts — you do not have to pull an equal share from each account individually. Workplace plans like a 401(k) work differently: if you have RMDs due from multiple 401(k) accounts at different former employers, each one generally has to be satisfied from that specific account rather than aggregated the way IRAs can be. Understanding which accounts can be combined for RMD purposes and which cannot avoids an accidental shortfall on one account even while over-withdrawing from another.
The Penalty for Missing One
Failing to withdraw the full required amount by the deadline triggers an excise tax on the shortfall, which was reduced in recent years but remains a meaningful penalty, applied on top of the ordinary income tax still owed on the distribution once it is eventually taken. This is one of the few places in the tax code with a genuinely punitive automatic penalty for simple inaction, which makes calendaring the annual deadline, similar to the discipline behind the annual financial checkup, more important for this account type than almost any other financial deadline in retirement.
Roth Accounts Are Treated Differently
Roth IRAs are not subject to RMDs during the original owner's lifetime, since contributions were already taxed going in and the government has no remaining deferred tax to collect. Roth 401(k)s historically were subject to RMDs despite the same after-tax contribution structure, but recent rule changes have aligned Roth 401(k) treatment with Roth IRAs, removing the lifetime RMD requirement there as well. This is one more reason a mix of traditional and Roth accounts, discussed in Roth IRA versus traditional IRA, gives more flexibility in retirement than an all-traditional approach, since Roth balances are not forced out on the government's schedule.
RMDs are less a savings strategy than an unavoidable feature of traditional pretax accounts once you reach the required age. The IRS's RMD FAQ page keeps the current age thresholds and calculation tables up to date, and checking it each year the rules apply to you is worth doing directly rather than relying on a remembered figure that may have since changed.