Most people spend decades putting money into their IRA or 401(k) and not thinking too hard about when or how they’ll take it out. Then retirement arrives, and at some point the IRS steps in with a requirement that often catches people off guard: you have to start withdrawing money whether you want to or not. These mandatory withdrawals are called Required Minimum Distributions, or RMDs, and mishandling them is one of the more common — and costly — mistakes Ohio retirees make.

Here’s a plain-English guide to how RMDs work, what the rules are after recent law changes, and how to keep more of your money working for you.

What Is an RMD?

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 certain age. The accounts subject to RMDs include:

Traditional IRAs
SEP IRAs
SIMPLE IRAs
401(k), 403(b), and 457(b) plans
Most other employer-sponsored retirement plans

The reason the IRS requires these withdrawals is straightforward: you got a tax break when you put the money in (or when it grew tax-deferred), and eventually they want their share. RMD withdrawals are taxed as ordinary income in the year you take them.

If you miss an RMD or don’t take the full amount, the penalty used to be a steep 50% of the amount you failed to withdraw. The SECURE 2.0 Act reduced that penalty to 25% — and in some cases 10% if you correct the mistake promptly. Still, it’s a penalty you want no part of.

When Do RMDs Begin?

This is where things got a little complicated in recent years. Congress passed the SECURE Act in 2019 and SECURE 2.0 in 2022, both of which changed the starting age for RMDs.

If you were born before July 1, 1949: RMDs began at age 70½ (old rules)
If you were born between July 1, 1949 and December 31, 1950: RMDs began at age 72
If you were born between January 1, 1951 and December 31, 1959: RMDs begin at age 73
If you were born on or after January 1, 1960: RMDs begin at age 75

For your first RMD, you actually have a grace period — you can delay taking it until April 1 of the year after you reach your RMD age. But if you do that, you’ll owe two RMDs in one calendar year (one for the prior year and one for the current year), which can push you into a higher tax bracket. Most people find it cleaner to take the first RMD in the year they actually turn the required age rather than delaying.

What About a 401(k) If You’re Still Working?

If you’re still working and contributing to a 401(k) with your current employer, you can generally delay RMDs from that specific plan until you retire — even if you’re past your RMD age. This exception does not apply to IRAs or to 401(k) plans from previous employers. If you have an old 401(k) from a job you left, RMDs apply on schedule.

How Your RMD Is Calculated

The IRS doesn’t just pick a number. Your annual RMD is calculated using two pieces of information:

Your account balance — specifically, the balance as of December 31 of the prior year
Your life expectancy factor — a number from the IRS Uniform Lifetime Table, based on your age

You divide the account balance by the life expectancy factor to get your RMD amount.

For example: if your traditional IRA had a balance of $400,000 on December 31 of last year and you are 73, the applicable denominator under IRS Table III (Uniform Lifetime) is 26.5, so your RMD would be about $15,094 (IRS Publication 590-B). The factor changes each year as you age, so recalculate annually.

If you have multiple IRAs, you calculate the RMD separately for each one but can take the total from any combination of those accounts — you don’t have to withdraw from each account individually. 401(k) plans are different: you must take the RMD from each 401(k) separately.

RMDs and Your Tax Bill

This is where RMDs become more than just a compliance exercise — they’re a real income planning issue. Every dollar you pull out is added to your taxable income for the year. Depending on how large your account balances are and what other income you have, RMDs can:

Push you into a higher federal tax bracket
Trigger Medicare IRMAA surcharges (higher Part B and Part D premiums)
Cause more of your Social Security benefits to become taxable
Affect Ohio income tax liability

Ohio does have some favorable treatment of retirement income — certain retirement income from IRAs and pensions may be eligible for the Ohio Retirement Income Credit — but RMDs can still meaningfully affect your overall tax picture. This is why income planning in your 60s, before RMDs kick in, is so valuable. There may be opportunities to do strategic Roth conversions, manage other income sources, or take distributions earlier to reduce the eventual RMD load.

What If You Don’t Need the Money?

A common frustration among retirees is being forced to take money they don’t need, pay taxes on it, and then figure out what to do with the after-tax proceeds. You have a few options:

Reinvest It in a Taxable Account

The most straightforward option. You take the RMD, pay the tax, and invest the remainder in a regular brokerage account. The money is no longer tax-deferred, but it can still grow and will receive favorable capital gains tax treatment on future earnings.

Use a Qualified Charitable Distribution (QCD)

If you’re 70½ or older, you can transfer up to $108,000 per year directly from your IRA to a qualifying charity (2025 limit per IRS Publication 526; the cap is adjusted annually for inflation, so check the current year’s figure). This counts toward your RMD but is excluded from your taxable income. If you’re already making charitable contributions and you itemize deductions, a QCD is usually more tax-efficient. Even if you take the standard deduction, the QCD keeps the income off your return entirely, which can affect Medicare premiums and Social Security taxation.

Consider Roth Conversions Before RMDs Begin

If you retire before your RMD age, you have a window — sometimes called the “Roth conversion opportunity years” — to move money from traditional IRAs to Roth IRAs at potentially lower tax rates. Roth IRAs are not subject to RMDs during the original owner’s lifetime. Converting now can reduce future RMDs and the tax hit that comes with them.

Roth IRAs and the RMD Exception

Traditional Roth IRAs owned by the original account holder have no RMD requirement. You can let the money grow tax-free for as long as you want. This makes Roth IRAs a powerful tool for leaving assets to heirs or for managing income in years when you want to control your tax bracket.

However, Roth 401(k)s — the Roth option inside an employer plan — were previously subject to RMDs. SECURE 2.0 changed that: starting in 2024, Roth 401(k) accounts are also exempt from RMDs during the account owner’s lifetime, bringing them in line with Roth IRAs. If you have a Roth 401(k) with a former employer and were taking RMDs from it, that requirement is now gone.

Note that beneficiaries who inherit Roth IRAs do face distribution requirements — so the tax-free status doesn’t last forever in every situation. Planning around inherited accounts is its own topic worth discussing with an advisor.

Common RMD Mistakes Ohio Retirees Make

Missing the deadline. RMDs generally must be taken by December 31 each year (except your first RMD, which you can defer to April 1 of the following year). People who wait until late December and run into processing delays have been hit with penalties. Start the process early in the fourth quarter at the latest.

Forgetting old employer 401(k)s. If you left a job years ago and kept a 401(k) with that employer, RMDs apply. It’s easy to lose track of accounts from former employers, especially if you’ve changed jobs multiple times.

Thinking the RMD amount is the maximum, not the minimum. You can always withdraw more than your RMD. Some retirees in lower income years choose to take extra distributions strategically to fill up lower tax brackets.

Not accounting for RMDs in Medicare planning. Large RMDs can trigger IRMAA — the income-related adjustment that increases your Medicare Part B and Part D premiums. IRMAA is based on your income from two years prior, so an unusually large distribution today affects your premiums the year after next. It’s worth running the numbers before taking a large distribution.

Not coordinating with a spouse. Married couples often have multiple retirement accounts. How and when you each take distributions, and how that affects combined taxable income, matters. A coordinated approach can reduce the total tax owed compared to each spouse making decisions independently.

Getting Help with RMDs in the Dayton Area

RMDs intersect with tax planning, Medicare costs, Social Security income, and estate planning in ways that make them more complicated than they look on the surface. The right strategy depends on your specific account balances, other income sources, filing status, and goals.

At Medicare & Retirement Solutions Group in Beavercreek, we help retirees across the Miami Valley — from Dayton and Kettering to Springboro and Xenia — think through the full retirement income picture, including how RMDs fit into it. If you’re approaching your RMD age or already taking distributions and want to make sure you’re handling them as efficiently as possible, reach out for a free consultation at medretiregroup.com.

Sources

This article is general educational information, not individualized financial, tax, or insurance advice. Medicare and tax figures are adjusted annually — confirm current-year amounts with the agency or your plan documents before acting on them.