IRA Withdrawals and Required Minimum Distributions (RMDs)

Filing & Brackets · RETIREMENT

Traditional IRA withdrawals are taxable, early withdrawals face a 10% penalty, and RMDs must start at age 73. Here's the complete guide to taking money out of your IRA the right way.

Putting money into an IRA is the easy part — taking it out comes with a maze of rules about taxes, penalties, and required withdrawals. Get it wrong and you could face a 10% early-withdrawal penalty or a stiff penalty for missing a required distribution. Here's how to navigate IRA withdrawals at every stage of life.

How IRA Withdrawals Are Taxed

The tax treatment depends on the type of IRA:

• Traditional IRA: contributions were typically deducted, so withdrawals are taxed as ordinary income. Every dollar you take out (unless you made nondeductible contributions) is taxable.
• Roth IRA: contributions were made with after-tax dollars, so qualified withdrawals — after age 59½ and a five-year holding period — are completely tax-free.

This is the core trade-off: traditional IRAs give you a deduction now and tax you later; Roth IRAs tax you now and pay out tax-free later.

The 10% Early-Withdrawal Penalty

If you withdraw from a traditional IRA before age 59½, you generally owe a 10% penalty on top of ordinary income tax. But there are many exceptions that waive the penalty (though not the income tax), including:

• First-time home purchase (up to $10,000)
• Qualified higher-education expenses
• Unreimbursed medical expenses above a threshold
• Health insurance premiums while unemployed
• Total and permanent disability
• A series of substantially equal periodic payments (72(t))
• Birth or adoption (up to $5,000)

Roth contributions (but not earnings) can always be withdrawn tax- and penalty-free since you already paid tax on them.

Required Minimum Distributions (RMDs)

The IRS won't let traditional retirement money grow tax-deferred forever. You must begin taking Required Minimum Distributions:

• RMDs now begin at age 73 (rising to 75 for those born in 1960 or later) under SECURE 2.0.
• Your first RMD can be delayed until April 1 of the year after you turn 73, but every RMD after that is due by December 31.
• The amount is calculated by dividing your account balance by an IRS life-expectancy factor.

Roth IRAs have no RMDs during the original owner's lifetime — another advantage of the Roth.

The Penalty for Missing an RMD

Failing to take your full RMD used to carry a brutal 50% penalty. SECURE 2.0 reduced it to 25% of the shortfall — and just 10% if you correct the mistake promptly and file the right form. Still, missing an RMD is an expensive error, so retirees with multiple accounts should track them carefully or have a professional calculate the total each year. A Qualified Charitable Distribution (QCD) — sending up to $108,000 (2025) directly from your IRA to charity — can satisfy your RMD without adding to your taxable income.

Frequently Asked Questions

At what age do I have to start taking money out of my IRA?

Required Minimum Distributions from traditional IRAs begin at age 73 (age 75 for those born in 1960 or later). Roth IRAs have no RMDs during the owner's lifetime.

What's the penalty for withdrawing from my IRA early?

Withdrawals before age 59½ generally face a 10% penalty plus ordinary income tax. Several exceptions — first home, education, disability, medical costs, and others — waive the penalty but not the tax.

Are Roth IRA withdrawals taxable?

Qualified Roth withdrawals (after age 59½ and a five-year holding period) are completely tax-free. You can also withdraw your original contributions anytime tax- and penalty-free.

What happens if I forget to take my RMD?

You face a penalty of 25% of the amount you should have withdrawn, reduced to 10% if you correct it promptly and file Form 5329. It's far better than the old 50% penalty, but still costly.

Can I give my RMD to charity to avoid tax?

Yes. A Qualified Charitable Distribution lets those 70½ or older send up to $108,000 (2025) directly from an IRA to charity, satisfying the RMD without adding it to taxable income.