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    Taxes & Annuities

    RMD Rules Explained

    Required minimum distributions force you to withdraw a portion of qualified retirement accounts each year. Understanding them avoids painful penalties.

    Calendar marked with RMD deadline reminder
    Missing an RMD can trigger a steep IRS penalty.

    What Is an RMD?

    A required minimum distribution is the amount the IRS requires you to withdraw each year from qualified retirement accounts (traditional IRAs, 401(k)s, and similar) starting at a specific age — currently 73 under SECURE 2.0.

    How RMDs Are Calculated

    Each year's RMD equals your prior year-end balance divided by an IRS life expectancy factor. The percentage required rises slightly each year as you age.

    How Annuities Affect RMDs

    Qualified annuities are subject to RMDs. Annuitized income payments often satisfy the RMD requirement on the annuity contract. QLACs can defer RMDs on a portion of qualified assets.

    Penalties for Missing an RMD

    Failing to take a full RMD historically triggered a 50% excise tax. SECURE 2.0 reduced this to 25%, with further reduction to 10% if corrected promptly — still painful.

    Planning Tips

    Coordinate RMDs with other income and tax brackets. Consider Roth conversions in low-income years before RMDs begin. Use qualified charitable distributions (QCDs) if you give to charity.

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