3 Big Required Minimum Distribution (RMD) Rule Changes that Have Taken Effect in Recent Years -- and What They Mean for Retirees

If you're approaching your 70s, or have recently entered them, you need to learn about and plan for your Required Minimum Distributions (RMDs). (There's a chance your retirement accounts don't feature them, but many do.)

If you think you know all you need to know about them, think again, because there have been some significant RMD changes in the past few years.

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Required Minimum Distributions 101

First, let's set the scene. It's smart to make the most of tax-advantaged retirement accounts such as IRAs and 401(k)s to help you save and invest for retirement. But some such accounts feature Required Minimum Distributions (RMDs).

Per the Internal Revenue Service (IRS), RMDs must be taken annually from traditional IRAs, SEP IRAs, and SIMPLE IRAs once we reach age 73. (Roth accounts do not feature RMDs for the original owners of the accounts.)

When you take your RMD, that income will count as taxable income to you -- so keep that in mind when developing your retirement plan.

The rules regarding RMDs change from time to time. Here are some recent changes.

1. Severe penalties have shrunk

The penalty for failing to take your RMD on time used to be very severe -- costing you 50% of the amount you failed to take. So if your RMD for the year was, say, $5,000 -- not an unusual amount -- you might have had to pay a $2,500 penalty. Ugh!

The penalty has now been reduced. It's still severe, if you ask me, but less so. It's now been cut in half, to 25%. Better still, if you catch your mistake and withdraw within two years, the penalty may be reduced to 10% -- once you file Form 5329.

2. Roth 401(k)s are now RMD-exempt

This rule change may give you more flexibility in your retirement planning, because whereas traditional IRAs and traditional 401(k)s -- and also Roth 401(k)s -- featured RMDs, Roth 401(k)s now do not require them.

This means you don't have to plan on taking certain sums from your Roth 401(k) account annually -- unless you want to.

3. Inherited traditional accounts have new rules

Inheritances can get tricky in various ways. For example, with regard to RMDs, if you inherit an IRA, you might be required to deplete it within 10 years. The rule doesn't apply to spousal heirs, but does apply to most heirs who were not married to the IRA owner who died -- if that IRA owner had reached age 73 before dying. (See? It's tricky!)

If you think this does or will apply to you, read up on the rules, and note that if you fail to follow these rules, you might face penalties.

4. You can donate more to charity via your RMD

If you're a charitable sort and like to donate to charities, you might do so via your RMD by executing a Qualified Charitable Distribution (QCD). With it, the sum you donate counts toward your RMD for the year. You lose the ability to count the sum as a charitable donation deduction come tax time, but it also won't count as taxable income to you, as a regular RMD would.

When the QCD was introduced beginning with the 2006 tax year, the limit was set at $100,000. That limit didn't change for nearly 20 years, but it will now be adjusted regularly for inflation. For 2026, the cap is raised to $111,000 per taxpayer, up from $108,000 in 2025.

There are numerous rules about QCDs, so if you're interested in them, read up to avoid mistakes and potential penalties.

5. The RMD beginning age has changed

Finally, there's this change: You used to have to start taking RMDs at 72, but that age has been increased to 73 -- and it's on its way to 75 by 2033. There has been confusion for those born in 1959, but that has now been clarified: Anyone born in 1959 will have to start taking RMDs at age 73.

When to take your first RMD

Now that we've covered some big changes, here's some vital information. If you're turning 73 in 2026 or soon after, take note:

• You have until April 1 of the year after you turn 73 to take your first RMD.
• After that, though, the deadlines fall on Dec. 31.
• So your second RMD will be due on Dec. 31 of the year you turn 74.

So, for example, if you're turning 73 in 2026, you have three ways to deal with your RMDs:

• You can take your first RMD in 2026 and your second in 2027.
• You can take your first RMD in 2027 (by April 1) and your second in 2027 as well (by Dec. 31). (This will likely result in considerably more taxable income for 2027.)
• You could take them in chunks across one or both years. The annual RMD doesn't need to be taken all at once. The total required amount simply needs to be withdrawn by the deadline.

It's smart to get savvy about RMDs, as that could save you a lot of money and headaches down the road.

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