Ask the Editor, December 12: IRAs, 401(k)s and RMDs

Each week, in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on topics submitted by readers. This week she's looking at eight questions on IRAs, 401(k)s and required minimum distributions. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. First RMD

Question: I turned 73 earlier this year, and I am retired. I know I must start taking required minimum distributions (RMD) from my traditional IRA. Can you explain the rules to me?

Joy Taylor: You are correct that people 73 and older must take annual RMDs from their traditional IRAs. (Note that starting in 2033, the beginning RMD age rises to 75.) To arrive at the RMD amount for 2025, you would start with your IRA balances as of December 31, 2024, and divide each one by the factor for your age, which you find in the tables in IRS Publication 590-B. The sum of the required withdrawal amounts can be taken from any IRA that you choose.

Generally, IRA owners must take their annual RMD by the end of the year. However, since 2025 is your first RMD year, you have until April 1, 2026, to take your 2025 RMD.

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If you opt to defer your first RMD to 2026, be sure you understand the consequences. You will be taxed in 2026 on two RMDs – the deferred one for 2025 and the RMD for 2026. This will end up increasing your adjusted gross income and taxable income in 2026. Note also that if you choose to defer your 2025 RMD, the deferred 2025 RMD amount will still be based on your total IRA balance as of December 31, 2024.

2. RMDs and traditional 401(k) accounts

Question: I am 73 years old and am still working. I don’t have an IRA, but I have two 401(k)s, one from a previous employer and one from my current employer. Do I have to take RMDs from these accounts for 2025?

Joy Taylor: Similar to owners of traditional IRAs, participants in traditional 401(k) workplace retirement plans must generally take RMDs, beginning at age 73. For people with multiple 401(k)s, the RMD must be taken from each 401(k) account. However, there is an exception in your case, since you are still working. You can generally delay taking an RMD from your current employer’s 401(k) until you retire, provided you don’t own more than 5% of the company that employs you. This exception doesn’t apply to 401(k) accounts with previous employers, so you will have to take your 2025 RMD from your 401(k) account with your previous employer.

Since 2025 is your first RMD year, you have until April 1, 2026, to take the RMD from your 401(k) account at your previous employer. If you opt to defer your first RMD to 2026, be sure you understand the tax consequences. You will be taxed in 2026 on two RMDs – the deferred one for 2025 and the RMD for 2026. This will end up increasing your adjusted gross income and taxable income in 2026.

3. Roth IRAs and 401(k)s

Question: Must RMDs be taken from Roth IRAs?

Joy Taylor: No, Roth IRA owners do not need to take RMDs. The same applies for owners of Roth 401(k) accounts. This is one of the benefits of investing in Roths.

4. RMDs for 2026

Question: I understand that I would use the balances in my traditional IRAs as of December 31, 2025, to figure my RMD amount for 2026. A significant portion of my IRA investments is in equities. What happens if the stock market tanks in 2026? Will the IRS eliminate RMDs for 2026 if this happens?

Joy Taylor: I can’t answer this question at this time. First, it is Congress, not the IRS, which must act to waive the RMD for any particular year. For example, Congress waived RMDs for 2020 soon after the COVID-19 pandemic started. Congress also waived RMDs for 2009 because of the economic recession. If the stock market falls precipitously next year and remains low for a while, then maybe there could be RMD relief, but this is just speculation.

5. RMDs and inherited traditional IRAs

Question: I just inherited a traditional IRA from my aunt, who died earlier this year at age 78. I know that I must clean out the IRA within 10 years, but do I also have to take an annual RMD from the IRA?

Joy Taylor: The answer is likely yes. For most nonspousal IRAs inherited after 2019, the IRA funds must be distributed to the beneficiary within 10 years of the owner’s death. Since your aunt died this year, you must clean out the IRA no later than December 31, 2035. There are exceptions for beneficiaries who are surviving spouses or minor children (until age 21) of the account owner, chronically ill or disabled, or not more than 10 years younger than the deceased IRA owner.

If the original IRA owner dies before his or her RMD date begins, and the beneficiary is subject to the 10-year clean-out rule, then the beneficiary needn’t take a minimum distribution each year. The beneficiary can immediately cash out, opt to wait until year 10 to get the money, get yearly distributions, or skip years, provided the IRA is fully depleted by the end of the 10-year period.

However, in your case, your aunt died after her RMD start date. Because of this, you must withdraw, at a minimum, annual RMDs from your inherited IRA during the 10-year period, generally beginning in 2026 (the year after your aunt’s death), and then fully deplete the IRA by year 10 at the latest. You would calculate your annual RMD based on your life expectancy and not that of your aunt.

6. RMDs and inherited Roth IRAs

Question: How does the 10-year clean-out rule apply to inherited Roth IRAs? Must RMDs be taken from inherited Roth IRAs?

Joy Taylor: Similar to the rules for traditional IRAs, many nonspousal beneficiaries of Roth IRAs inherited after 2019 must clean out the account by the end of the 10th year after the owner’s death. But the money is generally tax-free to them. Also, because Roth IRA owners are not required to take annual RMDs, beneficiaries of inherited Roths needn’t worry about whether the original Roth account owner died before or after the starting date for taking RMDs. These beneficiaries don't need to take annual RMDs. They can opt to clean out the account in year 1, wait until year 10 to take out all the Roth IRA funds, skip years or get annual distributions, provided they fully deplete the Roth IRA within the 10-year period.

7. RMDs and QCDs

Question: I have a traditional IRA, and I am currently taking annual RMDs. I am charitably inclined, and my financial advisor told me that if I make a qualified charitable distribution (QCD) from my IRA, then it will count against my taxable RMD. Is this true?

Joy Taylor: People age 70½ and older can transfer up to $108,000 in 2025 ($111,000 in 2026) from a traditional IRA directly to charity. A QCD can count as all or part of your RMD, provided you do it before taking your RMD for the year. QCDs are not taxable, and they are not added to your adjusted gross income or your modified adjusted gross income. Note that QCDs cannot be done from a 401(k) or other workplace retirement plan.

8. RMDs and Roth IRA conversions

Question: I am 74 years old, and I want to convert a portion of my traditional IRA to a Roth IRA next year. Must I take my full 2026 RMD from my traditional IRA before doing the conversion, even if I do the Roth conversion in early 2026?

Joy Taylor: Yes. Traditional IRA owners who are 73 and older must take annual RMDs. People of RMD age who are considering a Roth conversion must first take their full annual RMD for the year before doing the conversion. So if you plan to do a Roth conversion in 2026, you must first withdraw your full 2026 RMD from your traditional IRA before you do the conversion.

If you have multiple traditional IRAs, the rule that you must take your annual RMD before doing a Roth conversion for the year can be tricky. That’s because if a person has multiple traditional IRAs, the total aggregate RMD for the year must be withdrawn during the year before doing a Roth conversion from any of the traditional IRAs. For example, say you own three traditional IRAs, and your 2026 aggregate RMD from those three IRAs will be $73,612. If you want to do a Roth conversion from any of your traditional IRAs in 2026, you must first take your 2026 aggregate RMD of $73,612 from any of your traditional IRAs that you choose and then do the Roth conversion for the year.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor round-ups. So keep those questions coming!

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