RMDs, QCDs, and the age-73 clock

The tax deferral inside a traditional IRA or 401(k) is generous, but it was never permanent. At a set age, the IRS begins requiring annual withdrawals — whether you need the money or not — and taxing each one as ordinary income. These required minimum distributions (RMDs) are the scheduled end of the deferral deal from Chapter 3, and they are the deadline that gives the planning windows in Chapter 4 their shape.

When the clock starts

The starting age now depends on birth year: 73 for anyone born 1951–1959, and 75 for anyone born in 1960 or later. RMDs apply to traditional IRAs, rollover, SEP and SIMPLE IRAs, 401(k)s, 403(b)s, and most employer plans. Roth IRAs have no lifetime RMDs — and since 2024, Roth 401(k)s are exempt as well.

One first-year wrinkle: the very first RMD can be delayed until April 1 of the following year. It sounds like a gift, but the delay stacks two taxable distributions into the second year — which can push a household into a higher bracket or across an IRMAA cliff. It is a choice to model, not a default to take.

How the amount is set

The formula is short: the account balance on December 31 of the prior year, divided by an IRS life-expectancy factor for your age. At 73, the factor is 26.5 — so a $500,000 IRA requires a withdrawal of about $18,868, or roughly 3.8% of the balance. The percentage rises each year as the factor shrinks. Each IRA's RMD is calculated separately, but IRA amounts can be aggregated and taken from any one of them; workplace-plan RMDs must come from the plan that owes them.

The penalty for missing one

Missing an RMD once meant one of the harshest penalties in the tax code — 50% of the shortfall. The law has softened: the penalty is now 25%, and it drops to 10% if the miss is corrected within the two-year correction window (with a corrected Form 5329 filed). The IRS can also waive it entirely for reasonable error when the missed amount is taken and explained. More forgiving — but a missed RMD still forces taxable income into a compressed window, with bracket, torpedo, and IRMAA ripples. Staying current is the cleaner path.

The QCD: the charitable move that softens the clock

For charitable households, one tool stands out. A qualified charitable distribution (QCD) sends money directly from an IRA to a qualified charity — up to $111,000 per person in 2026 ($222,000 for a couple with separate IRAs), available from age 70½.

The mechanics are what make it powerful. A QCD counts toward the year's RMD, but the amount never lands in adjusted gross income at all — which keeps it out of the combined-income formula behind Social Security taxation and out of the MAGI that sets IRMAA premiums two years later. For a household that already takes the standard deduction — most retirees — a QCD keeps the AGI benefit that writing a check and hoping to itemize would not. Two mechanical rules: the transfer must go directly from the IRA custodian to the charity, and QCD eligibility begins at 70½ — before RMDs themselves start.

Shrinking future RMDs before they arrive

An RMD is just a balance divided by a factor — so the lever for reducing future RMDs is reducing the tax-deferred balance while the choice is still yours. That is the other face of the bracket-filling and Roth-conversion window from Chapter 4: every dollar converted to Roth in a low-bracket year is a dollar that never appears in an RMD calculation. Two boundaries apply. Once you reach RMD age, each year's RMD must come out first — and an RMD itself can never be converted to Roth; only amounts above it can. Which is precisely why the window before the clock starts is worth so much.

There is a satisfying symmetry to notice at this point in the course: the age-73 clock, the tax torpedo, and the IRMAA cliff are all pressure on the same balance — and the pre-RMD years are when a household has the most room to relieve it. What markets are doing during those same years is the last major variable, and it is the subject of Chapter 7.

The views and opinions expressed here are those of The Financial Sciences Company as of the publish date and are provided for informational and educational purposes only. They are not personalized investment, tax, or legal advice. The Financial Sciences Company, LLC is an investment adviser registered with the State of Texas. Registration does not imply a certain level of skill or training. Additional information is available in our Form ADV at adviserinfo.sec.gov.

General educational information, current as of 2026. Not personalized investment, tax, or legal advice — figures and rules change. For guidance specific to your situation, talk to a qualified professional.