Under SECURE 2.0, required minimum distributions (RMDs) must begin at age 73 for most retirement account holders. The annual RMD amount is calculated by dividing your account balance by an IRS life expectancy factor. Roth IRAs are exempt from RMDs during the owner's lifetime, but inherited Roth IRAs aren't.
RMDs apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, and most other employer-sponsored retirement accounts. You must take your first RMD by April 1 of the year following the year you turn 73. Waiting until April 1 of the following year means you take two RMDs in that second year, which can spike your income and affect IRMAA and tax brackets. Most advisors recommend taking the first RMD in the year you turn 73 to avoid the double-distribution year.
The RMD amount is calculated by dividing your December 31 account balance by your life expectancy factor from the IRS Uniform Lifetime Table. For a 73-year-old, the factor is 26.5, meaning approximately 3.77% of the account balance must be distributed. The factor decreases each year, meaning the percentage you must withdraw increases as you age. If your sole beneficiary is a spouse more than 10 years younger, you use the Joint Life and Last Survivor Table, which produces a lower distribution amount.
Illinois doesn't tax retirement account distributions, meaning RMDs are entirely exempt from Illinois income tax. Only federal income tax applies, at your ordinary income rate. For Northern Suburbs retirees with large IRAs, this state tax exemption is significant: a $100,000 RMD that would be taxed at 4.95% in most states saves approximately $4,950 in Illinois each year.
RMD planning is most valuable in the years before age 73. The window between retirement and the first RMD is prime time for Roth conversions, reducing the future IRA balance and therefore future RMD amounts. A smaller IRA at 73 means smaller mandatory distributions, lower taxable income, and potentially lower IRMAA surcharges for the rest of your life.
Key facts
- RMD start age: 73 (under SECURE 2.0, for anyone who turned 72 after December 31, 2022)
- First RMD deadline: April 1 of the year after you turn 73; all subsequent RMDs due by December 31
- Calculation: prior year December 31 balance ÷ IRS life expectancy factor (26.5 at age 73)
- Penalty for missed RMD: 25% of the RMD amount not withdrawn (reduced from 50% under SECURE 2.0); reduced to 10% if corrected within two years
- Roth IRA owners are NOT subject to RMDs during their lifetime
- Illinois doesn't tax RMD income, significant savings for large IRA holders
Can I take more than my RMD?
Yes, the RMD is a minimum, not a maximum. You can always withdraw more than required. Some retirees take larger distributions in lower-income years to reduce future RMDs and manage bracket exposure. Taking more than the RMD in early years can reduce IRMAA exposure, lower future Social Security taxation, and support a Roth conversion strategy.
What is a Qualified Charitable Distribution (QCD) and how does it help with RMDs?
A QCD allows IRA owners aged 70½ or older to donate up to $105,000 per year directly from their IRA to a qualified charity. The distribution satisfies the RMD requirement but isn't included in your taxable income. For retirees with charitable intent, a QCD is almost always better than taking the RMD as income and donating separately, particularly for those who take the standard deduction and can't itemize charitable gifts.