How RMDs Are Actually Calculated

Required minimum distributions (RMDs) are mandatory annual withdrawals that the Internal Revenue Code compels from most tax-deferred retirement accounts once the account owner reaches a specified age. The rule exists because contributions to accounts such as traditional IRAs and 401(k) plans were made with pre-tax dollars; the RMD mechanism ensures that those deferred dollars eventually enter the tax base.

The calculation itself is an arithmetic formula: a prior-year account balance divided by a life-expectancy factor drawn from IRS actuarial tables. That quotient is the minimum dollar amount that must be distributed from the account for that calendar year. Every variable in the formula — the balance, the applicable table, and the divisor — is defined by IRS regulation, and each can change from year to year.

The Step-by-Step Arithmetic of an RMD Calculation

Step 1 — Establish the prior year-end balance. The starting point is the fair market value of the account as of December 31 of the year immediately preceding the distribution year. For a 2025 RMD, the relevant balance is the December 31, 2024 account value. If an account received an outstanding rollover or recharacterization that was not yet credited on that date, specific IRS rules govern how those amounts are added back to the balance.

Step 2 — Identify the applicable IRS life-expectancy table. The IRS publishes three tables in Publication 590-B. The Uniform Lifetime Table applies to most account owners and uses a combined life expectancy based on the owner's age and a hypothetical beneficiary ten years younger. The Joint and Last Survivor Table applies when the sole designated beneficiary is a spouse who is more than ten years younger than the account owner — this produces a larger divisor and therefore a smaller required distribution. The Single Life Expectancy Table is used primarily by certain beneficiaries who inherited an account.

Step 3 — Look up the distribution period (the divisor). Using the account owner's age as of their birthday in the distribution year, the applicable table yields a number called the distribution period. For example, under the Uniform Lifetime Table updated in 2022, an account owner who turns 73 in the distribution year uses a distribution period of 26.5. The IRS updated these tables effective January 1, 2022, reflecting revised mortality assumptions; the older tables that applied before that date produced smaller divisors and therefore larger required distributions.

Step 4 — Divide. The December 31 prior-year balance is divided by the distribution period. The result is the RMD for that account for that year. If an individual holds multiple traditional IRAs, the RMD is calculated separately for each IRA, but the total amount can be aggregated and withdrawn from any one or combination of those IRAs. For 401(k) and other employer-sponsored plan accounts, the aggregation rule does not apply — each plan's RMD must be satisfied from that specific plan.

Age triggers and first-year timing. The SECURE 2.0 Act of 2022 moved the RMD starting age to 73 for individuals who turn 72 after December 31, 2022, and schedules a further increase to age 75 for those who turn 74 after December 31, 2032. For the first distribution year only, the account owner may delay the distribution until April 1 of the following calendar year. Taking that extension means two distributions fall in the same calendar year — the delayed first-year distribution and the second-year distribution, both of which are taxable income in that year.

Roth accounts. Roth IRAs are not subject to RMDs during the account owner's lifetime under current law. Roth accounts held inside a 401(k) or similar employer-sponsored plan were subject to RMDs before 2024; SECURE 2.0 eliminated that requirement for plan-held Roth accounts for distribution years beginning after December 31, 2023.

Who Administers the Calculation and the Distribution

For IRA accounts, the custodian — typically a brokerage or bank acting in a custodial role — holds the assets and is required to report the prior year-end fair market value to the IRS on Form 5498 by May 31 of the following year. IRA custodians are also required to either calculate the RMD amount for the account owner or offer to do so, and to notify the account owner that an RMD is due. The custodian does not, however, have an obligation to automatically distribute the amount; the account owner or their authorized agent must initiate the withdrawal.

For employer-sponsored plans — 401(k), 403(b), 457(b), and defined contribution pension plans — the plan administrator bears responsibility for calculating and distributing RMDs. The plan document governs the mechanics, but the administrator must comply with the minimum distribution rules under Internal Revenue Code Section 401(a)(9). Unlike IRA custodians, plan administrators for employer-sponsored plans are generally required to make the distribution automatically unless the participant has elected otherwise within the plan's procedures.

The IRS itself does not calculate or initiate RMDs. Its role is regulatory: it publishes the life-expectancy tables, issues guidance through publications and regulations, and assesses the excise tax when a required distribution is missed or insufficient. For tax year 2023 and later, the excise tax for a missed RMD is 25 percent of the amount that should have been distributed, reduced to 10 percent if the shortfall is corrected within a specified correction window — a reduction from the prior 50 percent penalty rate under SECURE 2.0.

Where the Calculation Produces Unexpected or Misunderstood Results

Multiple accounts and the aggregation asymmetry. The rule that permits IRA owners to aggregate their RMDs and satisfy the total from a single IRA does not extend to 401(k) accounts. An individual with two 401(k) accounts at different former employers must take a separate RMD from each. Withdrawing the combined total from only one of those plans leaves the other plan's RMD unsatisfied, triggering the excise tax on the shortfall — an outcome that surprises account owners who assume the IRA aggregation rule applies universally.

Inherited accounts and the 10-year rule. Non-spouse beneficiaries who inherited an IRA after December 31, 2019, are generally subject to the 10-year rule under the SECURE Act, which requires the entire account to be distributed by the end of the tenth year following the owner's death. IRS proposed regulations issued in 2022 indicated that, in many cases, annual distributions are also required during that 10-year window if the original owner had already begun taking RMDs — a position that generated significant confusion because the statute itself was read by many practitioners as permitting a lump-sum distribution at year ten with no interim requirement.

Market declines and the fixed-balance rule. The RMD is calculated on the December 31 prior-year balance regardless of what the account is worth on the date of distribution. If an account loses significant value between December 31 and the date the distribution is taken, the required amount remains based on the higher prior-year figure. The account owner must still distribute that calculated amount even if it now represents a larger percentage of the account's current value than the formula intended.

Still-working exception and its limits. Participants who are still employed and do not own more than five percent of the sponsoring employer may defer RMDs from that employer's plan past age 73 until they separate from service. This exception applies only to the current employer's plan; traditional IRAs and accounts from former employers remain subject to the standard age trigger regardless of employment status.

What Account Statements and IRS Notices Show — and What They Omit

The IRS Form 5498, issued by IRA custodians by May 31 each year, reports the December 31 fair market value of the account and indicates whether an RMD is required for the current year. Box 11 of the form carries a checkbox indicating that an RMD is due; Box 12a and 12b report the RMD amount and the required beginning date if the custodian calculated the amount. Importantly, Form 5498 is informational — it is not filed with a tax return and arrives after the April filing deadline, meaning it cannot be used to prepare the return on which the distribution is reported as income.

Distributions actually taken are reported on Form 1099-R, issued by the custodian or plan administrator by January 31 of the year following the distribution. Box 7 of Form 1099-R carries a distribution code; code 7 indicates a normal distribution from an account where the owner is over 59½. The form does not specify that a distribution was taken to satisfy an RMD — it reports only that a taxable distribution occurred. There is no IRS form or notice that confirms an RMD obligation has been fully satisfied for a given year; that determination rests with the account owner and, if applicable, the plan administrator.

Plan-level statements from employer-sponsored plans typically show the account balance as of the statement date and may include a projected RMD figure, but these projections are estimates based on current balances and may not reflect the December 31 value that the actual calculation will use. The authoritative balance for RMD purposes is always the year-end figure, not an interim statement balance.

The RMD calculation reduces to a single division problem, but the inputs — which table applies, which balance counts, which accounts can be aggregated — introduce enough variation that the arithmetic alone understates the complexity of the rule in practice.

Note: This explains how a retirement system works. It is not financial, tax, or legal advice, it is not specific to any individual's retirement, and it is not a substitute for a licensed financial, tax, or legal professional. Rules, ages, and dollar limits change by year — check the cited sources.