What Is a Required Minimum Distribution for a 401(k)?

A Required Minimum Distribution (RMD) is a mandatory withdrawal from retirement accounts like 401(k)s. The federal government allows these accounts to grow on a tax-deferred basis to encourage saving, meaning you don’t pay income tax on the money as it grows. RMD rules ensure this tax deferral is not permanent by requiring withdrawals at a certain age, which allows the government to collect tax revenue on the savings.

Determining Your Required Beginning Date

Under the SECURE 2.0 Act, the age to begin taking RMDs is 73. For individuals born in 1960 or later, the RMD age will increase to 75. Your first RMD must be taken by April 1 of the year after you reach your starting age, and for all subsequent years, the deadline is December 31.

An exception exists for some employer-sponsored plans. If you are still employed by the company sponsoring your 401(k) when you reach the RMD age, you may postpone withdrawals from that plan until you retire. This “still-working exception” is not available if you are a 5% owner of the business. The exception applies only to the 401(k) of your current employer; RMDs for traditional IRAs or 401(k)s from previous employers are still required.

You can delay your first RMD until April 1 of the following year, but this has a consequence. For instance, if you turn 73 in 2025, you could wait until April 1, 2026, for that first distribution. You would still need to take your 2026 RMD by December 31, 2026, and taking two distributions in one calendar year increases your taxable income, potentially pushing you into a higher tax bracket.

Calculating the RMD Amount

To calculate your annual RMD, you need your 401(k) account balance as of December 31 of the prior year and a life expectancy factor from the Internal Revenue Service (IRS). The formula is your prior year-end account balance divided by the distribution period factor. For instance, the RMD for 2025 is calculated using the account’s fair market value on December 31, 2024.

The life expectancy factor is found in the IRS’s Uniform Lifetime Table, which provides a distribution period based on your age. For example, a 74-year-old has a distribution period of 25.5. If your spouse is your sole beneficiary and is more than 10 years younger than you, you use the Joint Life and Last Survivor Expectancy Table, which results in a smaller RMD.

For example, if you turn 74 in 2025 and your 401(k) balance was $500,000 on December 31, 2024, your RMD would be $19,607.84 ($500,000 divided by 25.5). Many 401(k) plan administrators will calculate this for you, but understanding the formula is useful for verification and financial planning.

RMDs are not required for Roth 401(k) accounts until after the death of the original account owner. This aligns the rules for Roth 401(k)s with those for Roth IRAs, which are also exempt from lifetime RMDs for the owner.

Taking the Distribution and Tax Consequences

To take a withdrawal, contact your plan administrator, which is the company that manages the 401(k) for your employer. The administrator will process the request and send the funds to you via direct deposit or a check.

Your RMD from a traditional, pre-tax 401(k) is considered ordinary income for the year you receive it. This amount is added to your other income, such as Social Security or pension payments, and taxed at your federal income tax rate. The distribution will also be subject to state income taxes if your state has one.

Your plan administrator will withhold a portion for federal income taxes, with a default of 10% often applying to RMDs. You may have the option to elect a different withholding percentage or have no taxes withheld. An RMD cannot be rolled over into another tax-advantaged retirement account.

Penalties for Missed RMDs

Failing to take your full RMD by the deadline results in a penalty. The IRS imposes an excise tax of 25% on the amount of the RMD that was not withdrawn on time. For example, if your RMD was $20,000 and you only withdrew $5,000, the $15,000 shortfall would result in a $3,750 penalty.

The penalty can be reduced to 10% if you correct the shortfall by withdrawing the required amount within a specific correction window. To report the penalty, request a reduction, or ask for a waiver, you must file IRS Form 5329. To request a waiver, you must also attach a letter explaining that the failure was due to a reasonable error and that you are taking steps to remedy the shortfall.