Table of Contents

How Required Minimum Distributions Impact Your Traditional IRA Balance

By

澳洲幸运5官方开奖结果体彩网:Dorothy Neufeld

Updated April 14, 2025

Fact checked by

Vikki Velasquez

Part of the Series

A Guide to Traditional IRAs: Everything You Need to Know

Tradition꧂al IRAs: Your Complete Guide to Retireme🌟nt Savings

Introduction to Traditional IRAs

Opening an Account

Contribution & Tax Rules

Managing Your Investments

Older couple embracing on a sofa. — PIKSEL / Getty Images

If you have a traditional individual retirement account (IRA), the 🉐Internal Revenue Service (IRS) requires you to withdraw a minimum amount from your retirement savings each year once you reach a certain age—currently 73.

These withdrawals, known as 澳洲幸运5官方开奖结果体彩网:re𒅌quired minimum distribution🎃s (RMDs), have important tax implications to consider as you plan your retirement strategy. If you don’t withdraw the required amount on time, you can face ste🀅ep penalties, which is why it is important to be aware of🐽 the rules and tax implications for these accounts.

Key Takeaways

Required minimum distributions are mandatory withdrawals from certain retirement accounts, such as traditional IRAs, that must follow IRS rules or incur tax penalties.
To calculate your RMD, divide your account balance as of Dec. 31 of the previous year by the IRS distribution period number corresponding to your age.
If you miss your RMD deadline, you could owe a 澳洲幸运5官方开奖结果体彩网:tax penalty of up to 25% on the undistributed amount.

What Are the Important Rules to Know?

To avoid tax penalties, taking your annual RMD from your 澳洲幸运5官方开奖结果体彩网:traditional IRA before Dec. 31 is importaཧnt, starting at age 73. If you fail to do so, you’ll be subject to up to a 25% tax on the outst൲anding RMD amount.

There is one exception: In the first year you're required to take an RMD, you can delay your withdrawal until April 1 of the following year. However, you’ll need to take two distributions that year—one for the prior year and one for the current year.

Fast Fact

The 澳洲幸运5官方开奖结果体彩网:SECURE Act 2.0 changed the tax penalty of missed deadlines to 25% in December 2022, down from 50% in years prior.

It’s worth noting that the IRS changes the rules for RMDs often, so it's important to stay up to date with any changes, or consult with a tax advisor to achieve the most tax-efficient outcomes.

How Do You Calculate Your RMD?

Knowing your R💖MD requirements is an important part of tax planning, and the first step iᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚncludes calculating the formula for annual withdrawals after you reach a certain age.

While it's possible for your IRA provider to automatically calculate these distribution amounts for you, it's valuable to know what to expect since these withdrawals are treated as 澳洲幸运5官方开奖结果体彩网:taxable income each year under IRS rules.

These taxes are based on your 澳洲幸运5官方开奖结果体彩网:income tax bracket, which ranges from 10% to 37% in 2024 and 2025.

The basic formula is:
IRA balance as of Dec. 31 of the previous year ÷ IRS life expectancy factor = RMD

For example, if your IRA balance was $1 million and your 澳洲幸运5官方开奖结果体彩网:life expectancy factor is 26.5 (based on IRS tables for age 73), your RMD for the year would be $37,736.

Tip

The Investor.gov website provides a useful to help c🌳alculate your RMD🌌 amounts for each year.

Typically, these withdrawal amounts increase over time as you get older, which is important to be aware of since it will impact your overall tax strategy in retirement. In the following table, we show the life expectancy factor determined by the IRS based if a person meets either of the following conditions:

Unmarried
Married, but their spouse is 10 years younger than the account owner or less
Married, but their spouse isn't the sole beneficiary of the account

IRS Uniform Lifetime Table
Age	Distribution Period in Years
72	27.4
73	26.5
74	25.5
75	24.6
76	23.7
77	22.9
78	22.0
79	21.1
80	20.2
81	19.4
82	18.5
83	17.7
84	16.8
85	16.0
86	15.2
87	14.4
88	13.7
89	12.9
90	12.2
91	11.5
92	10.8
93	10.1
94	9.5
95	8.9
96	8.4
97	7.8
98	7.3
99	6.8
100	6.4

The life expectancy factor differs according to your circumstances, so it's important to check thes🥃e tables carefully by checking their website or consulting with an advisor. In sum, by planning your withdrawals based on the above steps, you can help create the most tax-efficient outcomes in your retirement strategy each year.

Common Misconceptions With RMDs

Navigating RMDs can be complex, and among the most c✅ommon misconceptions with RMDs is that these withdrawals are required to stay in your bank account.

“Individuals are sometimes disgruntled because they may not need the🤡 whole RMD and want to stay invested in the market,” says , a wealth manager at Coldstream Wealth Management. “They're excited to learn that although dollars must leave the IRA and be taxed, the proceeds are theirs to do as they please, including🔥 being reinvested within a taxable investment account, if desired.”

Another way to minimize tax costs on these withdrawals is by making charitable donations through a 澳洲幸运5官方开奖结果体彩网:Qualified Charita🍌ble Distribution (QCD). “Clients will often makeꦛ a few QCDs early in the year to 'chip away' at the remaini🍸ng RMD required that year,” says Bigelow.

Overall, clients can take different avenues for maximizing their retirement funds while reducing their tax burden in their broader 澳洲幸运5官方开奖结果体彩网:retirement strategy.

The Bottom Line

RMD withdrawals have a meaningful impact on your 澳洲幸运5官方开奖结果体彩网:traditional IRA balance. For this reason, it is important to plan carefully and stay up to date with IRS rules. The good news is that with strategic planning, you can make the most out of these funds by keeping a certain amount invested in the market in a taxable account or donating funds to charity as RMD amo🌺unts increase over time.

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