By Kyle Plotkin
Investment Advisor Representative
[email protected]
As retirement-focused financial advisors, one of the key areas we help clients navigate is their annual Required Minimum Distributions, or RMDs. RMDs are part of the trade-off when you contribute to traditional retirement accounts like IRAs, 401(k)s, 403(b)s, and TSPs. While you’re working, the government allows you to contribute pre-tax dollars to these accounts, reducing your taxable income in those years. In return, the IRS expects to collect taxes later—when you start taking withdrawals in retirement.
You can withdraw money without penalty from your retirement accounts as early as age 59½, but withdrawals become mandatory each year once you reach a certain age, even if you don’t need the income. This ensures the government eventually collects taxes on those deferred earnings—especially since many retirees fall into lower tax brackets and pay less tax overall.
The age at which RMDs begin depends on your birth year and was changed by Congress in both the SECURE Act and SECURE 2.0:
- If you were born in 1959 or earlier, RMDs start at age 73.
- If you were born in 1960 or later, they begin at age 75.
While you can always withdraw more than the minimum, you’re required to withdraw at least a specific percentage each year:
| Age | RMD Percentage |
| 73 | 3.77% |
| 74 | 3.92% |
| 75 | 4.07% |
| 80 | 4.95% |
| 90 | 8.20% |
| 100 | 15.63% |
| 120 | 50.00% |
A few important notes:
- Roth IRAs: Since contributions are made with after-tax dollars, they aren’t subject to RMDs.
- Roth Conversions: You can convert traditional IRA funds to Roth to reduce future RMDs, but you’ll owe income tax on the converted amount in the year you do it.
- IRA Aggregation: The IRS treats all your traditional IRAs as one entity, allowing you to take the total RMD from any combination of accounts. This rule doesn’t always apply to 401(k)s and 403(b)s, so double-check your situation.
- Charitable Giving: If you’re 70½ or older, you can make a Qualified Charitable Distribution (QCD) directly from your IRA to a qualified charity. QCDs count toward your RMD and are not taxed, but they must go directly to the charity and require proper documentation.
With thoughtful planning during your working years, you can manage your future RMDs and the taxes that come with them. We at Franklin Retirement are here to help you find the right strategy for your retirement goals.