Retirement accounts come with a rule that surprises many savers. Once you reach a certain age, the IRS expects you to start taking money out of most tax-deferred accounts. That forced withdrawal is called a required minimum distribution, and when you first calculate rmd for yourself, the math looks harder than it really is. In truth, the whole thing rests on one short division. Take your account balance from the end of the previous year, divide it by a number from an IRS table, and the answer is the smallest amount you must withdraw that year. This post walks through that formula with real numbers.
What a Required Minimum Distribution Actually Is
A required minimum distribution is the minimum amount the IRS requires you to withdraw each year from most tax-deferred retirement accounts once you reach a set age. It applies to traditional IRAs, 401(k) plans, and 403(b) plans, where contributions and growth were never taxed. Under the SECURE 2.0 rules, the starting age is 73 if you were born between 1951 and 1959, and 75 if you were born in 1960 or later. Roth IRAs are different: the original owner never faces a lifetime RMD. Each yearly RMD must be taken by December 31, and only the first one may be delayed until April 1 of the following year, though that means taking two withdrawals in one tax year.
The Formula in One Line
To calculate rmd for any year, you need only two numbers, and both of them are easy to find. The formula is simple: take your account balance on December 31 of the previous year and divide it by your life expectancy factor from the IRS Uniform Lifetime Table. That is the entire calculation. There is no need to guess at a percentage, because the table does the heavy lifting for you. The balance is the value your statement showed at the end of last year. The factor is a single number that depends on your age. Divide the first by the second, and the result is your RMD for the year.
Where the Factor Comes From
The life expectancy factor comes from the IRS Uniform Lifetime Table, published in IRS Publication 590-B. The table gives one factor for each age, and the factor gets smaller as you get older, so your RMD grows as a share of your balance. At age 73, the factor is 26.5. At age 74, it drops to 25.5. At age 75, it is 24.6. A smaller factor means a larger slice of your balance must come out, since you are dividing by a smaller number. Your custodian will usually show the factor on your statement. One exception: if your spouse is your sole beneficiary and is more than ten years younger than you, you use the Joint Life Table instead, which gives a smaller RMD.
A Worked Example With Real Numbers
Say you turned 73 this year and your traditional IRA held $500,000 on December 31 last year. Your factor at 73 is 26.5, so the division is $500,000 divided by 26.5, which gives $18,868. That is how you calculate rmd at age 73, and $18,868 is about 3.77 percent of the balance. The same method works at any age. At 74, a $400,000 balance divided by 25.5 gives $15,686. At 75, a $600,000 balance divided by 24.6 gives $24,390. A smaller balance follows the same pattern: $100,000 at 75 divided by 24.6 gives $4,065. The percentage creeps upward each year, from 3.77 percent at 73 to about 3.92 percent at 74 and 4.06 percent at 75, because the shrinking factor steadily raises the share you must withdraw.
Why Your RMD Changes Every Year
Your RMD is never a fixed number you can set once and forget, because both inputs to the formula move every year. Your account balance changes with the market and with your withdrawals, and your factor drops by roughly one point each birthday. A strong market year can raise your next RMD, while a weak year can pull it down. Redo the division fresh each year rather than copying last year’s amount. Missing an RMD is expensive: the IRS charges a 25 percent excise tax on the shortfall, reduced to 10 percent if you correct it within the window by taking the missed amount and filing Form 5329. The old 50 percent penalty no longer applies, but even 25 percent is a painful price for a missed deadline.
- Check your account balance on December 31 of the prior year.
- Look up your life expectancy factor for your current age.
- Divide the balance by the factor to get this year’s RMD.
- Withdraw at least that amount by December 31.
What balance do I use to calculate my RMD?
Use the account balance on December 31 of the previous year. For a 2026 RMD, that means the balance on December 31, 2025.
What happens if I withdraw less than my RMD?
The IRS charges a 25 percent excise tax on the shortfall. If you fix it within the correction window by taking the missed amount and filing Form 5329, the tax drops to 10 percent.
Do Roth IRAs have RMDs?
No. The original owner of a Roth IRA never takes a lifetime RMD, because Roth contributions were already taxed. Inherited Roth IRAs follow different rules.
Once you calculate rmd for the year, the number stops being a mystery. Check the December 31 balance, look up the factor, divide, and withdraw by December 31. With several accounts, a younger spouse, or an inherited IRA, the details can shift, so confirm the figures with a tax professional before you act. For a quick check of your own numbers, the free tool at MyWealthGuage runs the same division for you and shows the result in seconds.
Author: millerarchie
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