Required Minimum Distributions: Method

Required Minimum Distributions: How It Works

What it does

Money in a tax-deferred retirement account, such as a traditional IRA, has not been taxed yet. U.S. federal rules do not let it stay there indefinitely: from a certain age the owner must withdraw at least a set amount every year, the required minimum distribution, and that amount is generally taxed as ordinary income. The page figures this year's required amount from the balance at the end of last year and the owner's age, and then projects the balance, the required amount, the tax at a rate you enter and the amount left after tax, year by year. It states the rules as they are described in IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), in the edition for use in preparing 2025 returns. It is an illustration, not tax advice.

The method

Symbols. B₀ is the account balance at the close of December 31 of last year; f_k the table factor (the publication calls it the applicable denominator) for year k; D_k the required minimum distribution of year k; W_k the amount actually withdrawn; Q_k the part of it paid to charity as a qualified charitable distribution; r the yearly return and t_x the tax rate, as decimals; B_k the balance at the end of year k.

The rule. Publication 590-B: the required minimum distribution for a year is the account balance at the close of business on December 31 of the preceding year divided by the applicable denominator for the age reached on the birthday in that year.

D_k = B_k−1 / f_k

The factor. An owner reads it from Table III (Uniform Lifetime) of the publication's Appendix B: 26.5 at age 73, 24.6 at 75, 20.2 at 80, 16.0 at 85, 12.2 at 90, 6.4 at 100, and 2.0 at 120 and over. The factor falls with age, so the required share of the balance, 100 / f percent, rises: 3.8 % at 73, 6.3 % at 85, 8.2 % at 90. The page holds the whole of Table III and of Table I (Single Life Expectancy, used by beneficiaries) as printed in that edition.

When it starts. The 2025 edition gives age 73 as the age at which distributions become required, for people who reach age 72 after December 31, 2022. The age has been changed by law before, so the page takes it as an input. Before that age the required amount is zero and the projection lets the account grow.

Tax. The page applies one entered rate to the taxable part of each withdrawal:

Tax_k = t_x (W_k − Q_k),   after tax = W_k − Q_k − Tax_k

The projection. The account is assumed to earn the return r each year, and the withdrawal is taken once, at the end of the year:

B_k = B_k−1 (1 + r) − W_k

With no Advanced option in use, W_k = D_k. The totals are sums over the projected years, and the page prints the check that the withdrawals plus the last balance equal the first balance plus the return earned.

When the first distribution is due. Publication 590-B: the owner must begin receiving distributions by April 1 of the year following the year in which the beginning age is reached (the required beginning date); the distribution for each later year must be made by December 31 of that year. The first distribution may therefore be delayed into the next year, in which case two distributions fall in one calendar year. Nothing leaves the account in the first year, so the second year's amount is figured from a higher balance, B₀(1 + r) / f₂. The publication also states that when less than the required amount is distributed, a 25 % excise tax may be due on the amount not distributed, reduced to 10 % if the shortfall is corrected within a correction window.

Advanced: spouse more than 10 years younger. An owner whose sole beneficiary is a spouse more than 10 years younger uses Table II (Joint and Last Survivor Life Expectancy) at the two ages reached in the year. Its factors are larger, so the required amounts are smaller. Table II has several thousand cells and is not built in: you enter this year's factor, and the page figures this year's distribution, its tax and the balance at the end of the year. It shows no projection, totals or charts for this account type, because every later year needs the Table II factor for the two ages of that year (Publication 590-B, Appendix B, Table II).

Advanced: inherited account, 10-year rule. Publication 590-B: a designated beneficiary who is not an eligible designated beneficiary must withdraw the entire balance by December 31 of the year containing the 10th anniversary of the owner's death. If the owner died before the required beginning date, no distribution is required for any year before the 10th. If the owner died on or after it, the page also takes a distribution in each of years 1 to 9: the balance divided by the beneficiary's life expectancy from Table I at the age reached in the year after the death, reduced by one for each later year. In year 10 the whole balance is withdrawn.

Advanced: qualified charitable distribution. Publication 590-B: a distribution paid by the trustee directly to an eligible charity, by an owner who is at least age 70½ when it is made, is not included in income up to a yearly limit (108,000 per person in the 2025 edition; an input here) and counts toward the required minimum distribution. The page applies the entered amount in every year in which the age is 71 or more, withdraws at least that amount, and taxes only the rest.

Advanced: withdrawing more than the minimum. The extra amount is added to the required amount in every projected year. Publication 590-B: the excess gives no credit against the required minimum of a later year. It does lower the balance, and so every later required amount.

What it assumes

• One account, a constant yearly return and one withdrawal a year, at the end of the year. Actual returns vary; a withdrawal earlier in the year leaves less in the account to earn the return.
• One flat tax rate on the taxable part of every distribution. On a real return the distribution is stacked on other income, so its tax depends on the whole return, the state and the year.
• Ages in whole years, taken as the age reached on the birthday in each calendar year.
• The tables and the figures of the edition of Publication 590-B for 2025 returns. Later editions may change the beginning age, the tables or the limits.
• The whole account is pre-tax money (no nondeductible contributions, which would make part of each distribution a return of basis).

When it misleads

• The actual required amount uses the actual balance. Only the first row is a figure for a real year, and only if the balance entered is the trustee's December 31 value. Every later row depends on the assumed return.
• A constant return hides the order of returns. A fall in the market early in retirement lowers every later balance and distribution; the smooth lines of the charts cannot show that.
• It is the minimum, not a spending plan. The rule sets the least that must come out. It says nothing about how much a household needs or can afford to spend.
• Other accounts follow other rules. Publication 590-B states that the owner of a Roth IRA is not required to take distributions at any age. Employer plans have rules of their own that the publication does not cover. Several traditional IRAs are each figured separately, though the total may be taken from any of them.
• The inherited-account schedule is simplified. It leaves out eligible designated beneficiaries (a surviving spouse, a minor child of the owner, a disabled or chronically ill person, or someone not more than 10 years younger than the owner), who may take payments over their life expectancy; the owner's remaining life expectancy, which the publication uses when it is longer than the beneficiary's; trusts, estates and beneficiaries of a beneficiary.
• A much younger spouse: one year only. For that account type the page stops after this year; a later year is figured by entering that year's balance, age and Table II factor.
• Taxes are wider than one rate. A larger distribution can move other income into a higher bracket or change other items on the return; none of that is modelled.

Worked example

The default inputs are the example printed in Publication 590-B (2025 returns, page 8): a traditional IRA worth 100,000 at the end of the year, owner aged 75 in the distribution year, spouse 6 years younger, so Table III applies.

Table III at age 75: f₁ = 24.6.

D₁ = 100,000 / 24.6 = 4,065.04   (the publication prints 4,065)

That is 100 / 24.6 = 4.07 % of the balance. With the illustrative tax rate of 22 %:

Tax₁ = 0.22 × 4,065.04 = 894.31,   after tax = 4,065.04 − 894.31 = 3,170.73

With the illustrative return of 5 % and the withdrawal at the end of the year:

B₁ = 100,000 × 1.05 − 4,065.04 = 100,934.96

Next year the owner is 76 and the factor is 23.7:

D₂ = 100,934.96 / 23.7 = 4,258.86

The balance still grows because the required share (4.07 %) is below the return (5 %). It peaks at 103,151.34 at age 80, where the factor 19.4 of the following year makes the share 5.15 %. Over 20 years the withdrawals total 123,444.68, the tax on them 27,157.83, and 73,290.44 is left at the end of the year the owner is 94; the yearly distribution has grown to 8,166.07.

The same edition's second example changes only the spouse, who is 11 years younger and the sole beneficiary: Table II at ages 75 and 64 gives 25.3, and 100,000 / 25.3 = 3,952.57 (printed 3,953). In Advanced mode, choose the Joint Life account type; 25.3 is the default factor.

A calculator for education and analysis; an illustration, not tax advice or investment advice.