401(k) Required Minimum Distributions – What You Need to Know

Take your money or else! A required minimum distribution (RMD) is the amount the IRS forces you to withdraw from certain retirement accounts each year once you reacha certain age. The rules exist to make sure tax-advantaged retirement accounts aren'tused purely as estate planning vehicles to pass wealth to heirs tax-deferred forever.

If you participate in a 401(k) plan, you need to understand these rules. Missing an RMD triggers a steep IRS excise tax — and the rules have changed significantly in recent years. This article covers what every 401(k) participant should know, including a summary of the RMD rules for both account owners and beneficiaries.

When RMDs Must Begin

An RMD must be distributed from your 401(k) account each year once you reach your Required Beginning Date (RBD). For a 401(k) plan, the RBD is generally April 1 following the later of the calendar year in which you:

• Reach the RMD Age, or
• Retire (if your plan allows the “Still Working” exception).

After your first RMD, each subsequent RMD must be received by December 31 of the applicable year.

RMD Age

The age at which RMDs must begin depends on the year you were born. SECURE 2.0 increased the starting age — twice.

The “Still Working” Exception

You may be able to delay your first 401(k) RMD past your RMD age if you're still working for the

employer who sponsors the plan. This delay is available to employees who don't own more than 5% of the business. If you do own more than 5%, your RMDs must begin at your RMD age

regardless of whether you're still working.

Important: The still-working exception only applies to the 401(k) sponsored by your current employer. RMDs from former employers' plans and traditional IRAs must still begin at your RMD age.

Example: Scarlett was born in 1953, making her RMD age 73 (reached in 2026). She continues to work for the employer who sponsors her 401(k), her plan allows the delay, and she doesn't own more than 5% of the business. Scarlett doesn't need to take a 401(k) RMD until she retires.

Check your plan's Summary Plan Description or with your employer to see if the still-working exception is available in your plan.

Should You Delay Your First RMD?

If you delay your first RMD to April 1, you'll end up taking two RMDs in the same calendar year — the prior year's by April 1, and the current year's by December 31. That can bump you into a higher tax bracket.

Example: Diego was born in 1953 and retired in 2025. His RMD age is 73, which he reaches in 2026. His first RMD (for 2026) must be received by April 1, 2027. His second RMD (for 2027) must be received by December 31, 2027 — meaning he could take both in 2027 if he delayed the first. Each subsequent RMD is due by December 31.

How RMDs are Calculated

An RMD is calculated by dividing your prior year-end 401(k) account balance by a life expectancy factor from IRS tables. The IRS updated these tables in 2022 to reflect longer life expectancies.

Life Expectancy Factors

Most participants use the Uniform Lifetime Table. (A different table applies if your sole beneficiary is a spouse more than 10 years younger than you.) A sample of factors for the ages around when RMDs commonly begin:

Sample RMD Calculation

Taking More Than the RMD Minimum

Once you've reached RMD age or retired, you're generally permitted to take larger distributions from your 401(k). Plan rules may impose limits on partial distributions, so check your Summary Plan Description.

However, taking more than the minimum in one year doesn't reduce your RMD for future years. You can't “prepay” RMDs.

Taking RMDs from Multiple Accounts

If you have more than one 401(k) account, you must calculate and take an RMD separately from each one. You cannot aggregate the balances and take the combined RMD from just one account.

This differs from IRAs, where you can aggregate balances across traditional IRAs and take the total RMD from a single IRA.

How RMDs Are Taxed

RMDs from your 401(k) can't be rolled into another 401(k) or an IRA. They must be taken as cash. Amounts above the RMD minimum, however, remain eligible for rollover.

Like other 401(k) distributions, RMDs are taxed as ordinary income at the federal level (and possibly at the state and local levels).

Because they aren't eligible for rollover, RMDs are not subject to the mandatory 20% federal tax withholding. Instead, they're subject to 10% withholding by default — but you can elect a different rate, including 0%.

Roth Accounts Not Subject to RMDs

Starting in 2024, Roth 401(k) accounts are no longer subject to lifetime RMDs. This brings Roth 401(k) accounts in line with Roth IRAs.

RMDs are still required from a Roth 401(k) after the participant's death — but during the participant's lifetime, no RMD is required.

Example:If Scarlett's entire 401(k) balance were Roth, she would have no lifetime RMDs at all. Her beneficiaries would still face RMD rules after her death.

Making RMDs to Death Beneficiaries

RMDs don't end with the participant. When a 401(k) participant dies, the rules governing how quickly the account must be paid out depend on (1) who the beneficiary is and (2) whether the participant had already started RMDs at the time of death.

The SECURE Act significantly changed these rules for most non-spouse beneficiaries by eliminating the long-running “stretch” option and replacing it with a 10-year payout. SECURE 2.0 and final IRS regulations issued in 2024 further clarified how these rules work.

Beneficiaries fall into three categories:

• Eligible Designated Beneficiaries (EDBs): Surviving spouses, minor children of the participant (until they reach age 21), disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than the participant. EDBs can generally stretch RMDs over their own life expectancy.
• Designated Beneficiaries (non-EDBs): Most other living individuals named as beneficiaries — typically adult children. They are generally subject to the 10-year rule.
• Non-Designated Beneficiaries: Estates, most trusts (other than qualifying “see-through” trusts), and charities. These beneficiaries do not get the 10-year rule — they're subject to either the 5-year rule or the participant's remaining life expectancy, depending on when the participant died.

The 10-Year Rule

For designated beneficiaries subject to the 10-year rule, the full account balance must be distributed by December 31 of the year containing the 10th anniversary of the participant's death.

Whether annual RMDs must be taken during the 10-year window depends on when the participant died. If the participant died on or after their RBD, the beneficiary must take annual RMDs in years 1–9 of the window and clean out the remaining balance by the end of year 10. If the participant died before their RBD, no annual RMDs are required during the window — only the full payout by the end of year 10.

Surviving Spouses Have Extra Options

Surviving spouses get the most flexibility. A surviving spouse can generally:

• Roll the inherited 401(k) into their own IRA or 401(k), treating it as their own (RMDs then follow the spouse's own RMD schedule);

• Remain as a beneficiary of the deceased's 401(k) and take RMDs over their own life expectancy; or

• Elect to be treated as the deceased participant under new SECURE 2.0 rules — useful when the deceased spouse was younger, since it can delay RMDs until the deceased would have reached RMD age.

Refer to the plan's Summary Plan Description for the specific death benefit options available.

Penalties for Missing an RMD

If you miss an RMD (or take less than required), the shortfall is subject to a 25% IRS excise tax. The penalty drops to 10% if you correct the shortfall promptly — generally within a two-year correction window — and before the IRS notifies you of the failure.

SECURE 2.0 cut these penalties from the prior 50% rate. The IRS has historically waived the penalty when a participant can show the shortfall was due to reasonable error and reasonable steps are being taken to remedy it (Form 5329). It remains to be seen how aggressively the IRS will grant waivers now that the penalty is lower.

Summary of RMD Rules for Account Holders

The 401(k) RMD rules are nuanced, but here's the high-level view at a glance.

Summary of RMD Rules for Account Beneficiaries

The RMD rules for beneficiaries depend on the type of beneficiary and whether the participant died before or after their required beginning date (RBD).

Don't Let RMDs Catch You Off Guard

RMD rules are detailed, but the consequences of getting them wrong — a 25% excise tax on the shortfall — are real money. Understanding when your RMDs begin, how they're calculated, and what your beneficiaries will face down the road helps you protect what you've worked your whole career to save.

If you have questions about how the RMD rules apply to your 401(k), reach out to your plan's recordkeeper or a qualified tax advisor. And if your business is shopping for a 401(k) provider, we'd love to talk — Employee Fiduciary specializes in low-cost, full-service 401(k) plans for small and midsize businesses.