A required minimum distribution (RMD) is the minimum annual withdrawal from a pretax retirement account such as an IRA after the owner reaches the applicable starting age. RMDs turn withdrawal sequencing into a constrained decision: the required IRA distribution may force taxable income even when a plan would otherwise draw from taxable assets first. section 9.3.1
For retirees under Secure Act 2.0 rules described here, RMDs begin in the year they turn 73; the starting age is 75 for people born in 1960 or later. Compute an RMD by dividing each retirement account’s December 31 prior-year value by an IRS life-expectancy factor. The Uniform Lifetime Table applies to most people, while a different table can apply when a sole-beneficiary spouse is more than 10 years younger. section 9.3.1
In a withdrawal model, RMDs change the available choices in several ways:
- They can reduce the advantage of exhausting less-tax-advantaged accounts first, because IRA withdrawals are required regardless of the preferred sequence. section 9.3.1
- They do not change a plan when the intended IRA withdrawal already exceeds the RMD. section 9.3.1
- They can shrink a Roth conversion: required distributions cannot themselves be converted to a Roth IRA. section 9.3.1
- They can be reduced over time by converting IRA assets to Roth IRA assets, which are not subject to RMDs. section 9.3.1
Comparing constrained strategies
Add age as an input to a retirement-withdrawal simulation, calculate the RMD at every age, and compare portfolio longevity with and without the constraint. In the displayed comparison, taxable-first withdrawals fall from 48.7 to 47.3 years, while a Roth-conversion strategy falls from 53.2 to 52.1; IRA-first and filling the 12% bracket first remain unchanged. section 9.3.1
Inheritance can reverse a simple taxable-first rule. A nonspouse inheriting an IRA whose owner died in 2020 or later generally must distribute it within 10 years; inherited Roth IRAs face the 10-year rule but no RMDs in years 1 through 9. Whether the owner or heirs should deplete a traditional IRA first depends partly on their relative tax brackets and on the potential stepped-up basis of taxable assets. section 9.3.2
