Required minimum distributions: 5 IRA mistakes to avoid

Once you reach a certain age, the IRS requires you to start taking money out of most tax-deferred retirement accounts every year. These are required minimum distributions, or RMDs, and the rules trip up a lot of retirees.

Key takeaways

• RMDs generally begin at age 73 (75 if you were born in 1960 or later), and each one after the first is due by December 31.
• Traditional IRA RMDs can be added up and taken from any one IRA; 401(k) RMDs generally come from each plan separately.
• A missed RMD triggers a 25% excise tax, which can drop to 10% if you correct it promptly.
• A qualified charitable distribution can count toward your RMD without adding to your taxable income.

1. Missing your start date

RMDs generally begin at age 73 (75 if you were born in 1960 or later). You can delay your first one until April 1 of the following year, but every RMD after that is due by December 31. Delaying the first one means taking two in the same year, which can push you into a higher bracket.

2. Taking the wrong amount

Your RMD is based on your account balance at the end of the prior year, divided by a life-expectancy factor from IRS tables. Using the wrong balance, or the wrong table, can mean taking too little.

3. Mixing up which accounts can be combined

You can add up the RMDs for all of your traditional IRAs and take the total from any one of them. But 401(k) RMDs generally must be taken from each plan separately.

4. Not fixing a missed RMD quickly

Missing an RMD triggers a 25% excise tax on the amount you should have taken. If you correct it promptly, that can drop to 10%. If you realize you’ve missed one, act quickly and talk with your tax preparer.

5. Overlooking smarter ways to take it

From age 70½, you can give directly from your IRA to charity through a qualified charitable distribution. It counts toward your RMD and isn’t included in your taxable income. Planning withdrawals earlier, or converting to a Roth in lower-bracket years, can also shrink future RMDs. Roth IRAs don’t require minimum distributions for the original owner.

Sources and references

• IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) (opens in a new tab)
• IRS: Retirement topics - Required minimum distributions (RMDs) (opens in a new tab)

This article is general information, not tax advice for your situation. Rules change; talk with a qualified professional before acting.