Updated Required Minimum Distribution Rules
Just as the IRS sets limits on how much you can contribute to retirement accounts during your working years, it also regulates how and when you must begin taking money out. Because traditional retirement accounts are funded with pre‑tax dollars, the government eventually requires distributions so that deferred taxes can be collected. These withdrawals (Required Minimum Distributions aka RMDs) are designed to ensure that retirement savings are drawn down over time.
While the concept is straightforward, the rules have shifted several times in recent years, creating understandable confusion for retirees and those approaching retirement.
When Do RMDs Begin? How Should You Take Them?
The RMD age has changed multiple times, but under current law, RMDs begin at age 73. This age will remain in place until 2033, when it increases to 75.
The timing matters because the IRS calculates your RMD based on your account balance and life expectancy. The required percentage increases each year, gradually drawing down the account so taxes can be paid over your lifetime.
If you turn 73 in 2026, you have two options for your first RMD:
- Take it by December 31, 2026, or
- Delay it until April 1, 2027
Delaying may make sense for some households, but it comes with a catch: you’ll take two RMDs in 2027, which may push you into a higher tax bracket or affect Medicare premiums. It’s important to evaluate the tax impact before deciding.
The penalty for failing to take an RMD is significant, 25% of the amount not withdrawn, in addition to the income tax owed. Planning ahead is essential.
If you are still working at age 73 and have assets in a 401(k), you may be able to delay RMDs from that employer’s plan until the year after you retire, depending on plan rules.
For those with multiple retirement accounts, the rules differ:
- IRAs: You must calculate the RMD for each IRA, but you may withdraw the total amount from any one IRA.
- 401(k)s and other employer plans: You must take the RMD from each individual account.
Coordinating these withdrawals thoughtfully can help you manage your taxable income, avoid Medicare surcharges, and maintain a diversified investment strategy.
Roth 401(k) Accounts Now Follow Roth IRA Rules
As a reminder, this rule has been in effect since the beginning of 2024. Roth 401(k)s are no longer subject to RMDs, aligning them with Roth IRAs. This allows Roth 401(k) assets to continue growing tax‑free throughout the owner’s lifetime.
This change is especially helpful for individuals who only opened a Roth IRA later in life. Previously, rolling Roth 401(k) assets into a Roth IRA triggered the five‑year rule for tax‑free earnings withdrawals. Now, Roth 401(k) assets can remain in the plan without RMD pressure.
Qualified Charitable Distributions (QCDs) Become More Generous
A Qualified Charitable Distribution allows IRA owners age 70½ or older to donate directly to charity and have the amount count toward their RMD, without increasing taxable income.
For 2026, the QCD limit is $111,000, reflecting the IRS’s annual inflation adjustment (up from $108,000 in 2025). For married couples, each spouse with an IRA can make their own QCD, effectively doubling the opportunity.
QCDs remain one of the most tax‑efficient ways to support charitable causes while reducing taxable income in retirement.
The Bottom Line
Taking money out of your retirement accounts often requires more planning than putting it in. The rules differ from the accumulation years, and the tax implications can be significant. Understanding how RMDs work and how they interact with your broader retirement, tax, and charitable strategies, is essential to protecting your long‑term financial wellbeing.
How Martos Wealth Supports You
At Martos Wealth, we specialize in clarifying these evolving rules. Our work centers on translating complex financial regulations into practical guidance. This includes coordinating RMD timing, evaluating tax implications, integrating charitable strategies such as QCDs, and ensuring each withdrawal supports your broader financial plan. We approach this as long‑term partners in your financial wellbeing, helping you make thoughtful, informed decisions that reflect both your goals and your values.
Disclaimer
This article is provided for educational, general information, and illustration purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Martos Wealth Management, LLC, and all rights are reserved.
