What Is a Required Minimum Distribution (RMD)?
A Required Minimum Distribution (RMD) is the minimum amount you must withdraw annually from tax-deferred retirement accounts — including traditional IRAs, 401(k)s, and 403(b)s — starting at age 73. RMD amounts are calculated by dividing your account balance by a life expectancy factor from IRS Uniform Lifetime Tables. Failure to take the full RMD results in a 25% excise tax on the shortfall.
Why It Matters
RMDs are one of the most significant — and most misunderstood — aspects of retirement tax planning. They force you to withdraw taxable income whether you need it or not, which can push you into higher tax brackets, increase the taxation of Social Security benefits, and trigger Medicare IRMAA surcharges.
Strategic planning around RMDs — including Roth conversions before age 73, qualified charitable distributions (QCDs), and withdrawal sequencing — can save substantial amounts over a 20-30 year retirement. For Arizona residents, RMDs are taxed at the state's 2.5% flat rate, making pre-RMD Roth conversions at Arizona's low rate particularly attractive.
How It Works
When RMDs begin: Age 73 under the SECURE 2.0 Act (for those born 1951-1959). Those born in 1960 or later will begin at age 75.
How to calculate: Divide your December 31 account balance by your life expectancy factor from the IRS Uniform Lifetime Table. For example, at age 73, the factor is 26.5 — so a $500,000 IRA would require a minimum withdrawal of approximately $18,868.
Which accounts: Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and 457 plans. Roth IRAs do NOT have RMDs during the owner's lifetime. Roth 401(k)s previously required RMDs but are exempt starting in 2024 under SECURE 2.0.
Deadline: First RMD can be delayed until April 1 of the year after you turn 73, but this means two RMDs in one year (the delayed first plus the current year's), which can create a large tax hit.
Penalty for missing: 25% excise tax on the amount not distributed (reduced to 10% if corrected within 2 years).
Aggregation rules: If you have multiple traditional IRAs, you can aggregate the RMDs and take the total from any one or combination of IRAs. 401(k) RMDs must be taken separately from each plan.
Example
A 73-year-old Mesa retiree has $600,000 in a traditional IRA and $200,000 in a Roth IRA. The RMD on the traditional IRA is approximately $22,642 ($600,000 ÷ 26.5). This $22,642 is taxed as ordinary income — federally and at Arizona's 2.5% rate. The Roth IRA has no RMD, so those funds can continue growing tax-free. If this retiree had converted $100,000 from the traditional IRA to the Roth at age 65 (paying tax then), the RMD would be based on $500,000 instead — saving roughly $3,774 in forced distributions annually, with the converted funds now growing tax-free.
Required Minimum Distribution (RMD) in Arizona
Arizona's 2.5% flat income tax means RMDs are taxed at a low state rate, but the federal tax impact remains significant. Arizona residents can reduce RMD impact through:
1. Pre-73 Roth conversions — converting traditional IRA funds during lower-income years (especially between retirement and age 73) 2. Qualified Charitable Distributions (QCDs) — if you're 70½+, you can direct up to $105,000 per year from your IRA to qualified charities, satisfying your RMD without counting as taxable income 3. Strategic withdrawal timing — coordinating RMDs with Social Security and other income to stay in lower tax brackets
Common Questions About Required Minimum Distribution (RMD)
What age do I have to start taking RMDs?
Do Roth IRAs have Required Minimum Distributions?
Can I reduce my RMDs?
Related Terms
Traditional IRA
A traditional IRA is an individual retirement account where contributions may be tax-deductible in the year they're made...
Roth Conversion
A Roth conversion is the process of moving funds from a traditional IRA, 401(k), or other pre-tax retirement account int...
401(k)
A 401(k) is an employer-sponsored retirement savings plan that allows employees to contribute a portion of their pre-tax...
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