Part 1 — Direct Answer

Required Minimum Distributions (RMDs) are mandatory annual withdrawals that the IRS requires you to take from traditional IRAs, 401(k)s, and other tax-deferred retirement accounts beginning at age 73. The amount is calculated each year using your prior December 31 account balance divided by a life expectancy factor from IRS tables. Every dollar of an RMD is taxable as ordinary income. Failing to take your full RMD triggers a 25% excise tax on the shortfall.

Part 2 — Detailed Explanation

The RMD rules exist because pre-tax retirement accounts were never meant to be permanent tax shelters. When you contribute to a traditional IRA or 401(k), you defer income tax on those dollars — but the IRS always intended to collect that tax eventually. RMDs are the mechanism that forces distributions and tax recognition, regardless of whether you need the income.

The RMD amount changes every year based on two variables: your account balance on December 31 of the prior year, and your life expectancy factor from the IRS Uniform Lifetime Table. For a 73-year-old, the divisor is approximately 26.5, meaning roughly 3.8% of the account balance must be distributed in the first year. At 80, the divisor drops to approximately 20.2, requiring about 5% annually. As the divisor shrinks each year, the required distribution grows as a percentage of the balance — and if the account itself is also growing, the absolute dollar amounts can become very large very fast.

For someone with a $2 million traditional IRA at age 73, the first RMD would be approximately $75,000-$80,000. That distribution is added to any other income — Social Security, pension, investment returns, rental income — and the combined amount determines your tax bracket for the year. For many retirees, the arrival of RMDs is the moment they discover they owe significantly more in taxes than they expected.

The rules have evolved with recent legislation. The SECURE 2.0 Act pushed the RMD starting age from 72 to 73 for those born between 1951 and 1959, and to 75 for those born in 1960 or later (effective 2033). Pre-death RMDs from Roth accounts inside employer plans were also eliminated under SECURE 2.0, making Roth 401(k)s significantly more attractive for estate planning purposes.

There are strategies to reduce RMD impact. Roth conversions before age 73 reduce the pre-tax balance subject to future RMDs — the single most powerful long-term tool. Qualified Charitable Distributions (QCDs) allow those 70½ or older to donate directly from an IRA to a qualified charity — up to $105,000 annually — satisfying all or part of the RMD without the distribution counting as taxable income or MAGI. Strategic withdrawal sequencing — drawing from pre-tax accounts deliberately in the years before RMDs are mandatory — can reduce the balance and therefore the future forced distributions.

Part 3 — What This Means for You

If you are 60-70 with a large traditional IRA or 401(k) and haven't yet modeled your future RMDs, the number that comes out of that projection often surprises people. A $1.5M IRA at age 60, growing at a conservative 6% with no distributions taken, becomes approximately $3.4M at age 73. The first RMD on that balance would be over $125,000 — taxable as ordinary income on top of Social Security and any other income you have. That's likely a 24% or higher federal bracket, plus Arizona state income tax.

The window to do something about it runs from now until the day your first RMD is due. Every year of Roth conversions, every year of strategic pre-RMD distributions, every year of QCDs starting at 70½ — they all compound into a materially different retirement tax picture. The question isn't whether RMDs are coming. It's how large they'll be and whether you've built a strategy around them.

Part 4 — Common Mistakes and Misconceptions

• The single most expensive RMD mistake is delaying the first distribution to April 1 of the year following the year you turn 73. While IRS rules permit this, it means taking two RMDs in the same calendar year — the delayed first-year RMD and the second-year RMD — which can spike income and push you into a higher bracket and IRMAA tier simultaneously.
• The second mistake is not aggregating RMDs correctly. If you have multiple IRAs, your total RMD can be satisfied by taking the full amount from any one or combination of IRAs — but you must calculate the correct total first. The calculation must be done separately for each account even if distributions can be taken from fewer accounts.
• The third mistake is missing the deadline. RMDs must be taken by December 31 each year (with the first-year exception noted above). The 25% excise tax on missed amounts is severe and entirely avoidable.