Waiting until age 73 to plan an RMD can narrow your practical choices. The years before that milestone offer valuable time to organize accounts, understand deadlines, and prepare for how required withdrawals may fit with other retirement income.
See how Hoxton’s planning process can help organize your RMD questions.
Required minimum distribution planning is the process of preparing for mandatory withdrawals from certain retirement accounts. It includes identifying affected accounts, estimating withdrawals, comparing timing choices, and coordinating distributions with cash flow, taxes, charitable goals, and portfolio decisions. Starting early creates time to ask informed questions before fixed deadlines arrive.
The IRS generally requires an account owner to begin annual RMDs at age 73. The first deadline has a special delay option, while later distributions are generally due by December 31. Account type, work status, and beneficiary details can change how the rules apply. This article offers general education, not individualized tax or investment advice.
Required minimum distribution planning starts before age 73
Planning before age 73 is not about rushing money out of a retirement account. It is about making the rules visible early enough to prepare. A useful starting point is to place every account, income source, and key date on one planning timeline.
Understand the first two deadlines
The first RMD is generally due by April 1 of the year after the year an owner reaches age 73. Later RMDs are generally due by December 31. Delaying the first distribution does not remove the second deadline. It may place two distributions in the same calendar year.
That timing difference can matter because distributions from tax-deferred accounts are generally included in taxable income. A clear two-year estimate can help frame questions for a tax professional. Use Hoxton Planning & Management LLC’s tax strategy planning calendar to collect important dates and discussion points.
Build a practical timeline
- Several years before age 73: Inventory accounts, estimate income sources, and note likely cash needs.
- The year before age 73: Confirm which accounts are covered and review plan-specific rules.
- The year age 73 is reached: Verify calculations, compare first-year timing, and arrange the distribution.
- Every year afterward: Recalculate, coordinate, distribute, and document completion.
The retirement readiness checklist can help organize the wider questions around income, accounts, and planning priorities. Confirm current rules with each custodian and the professionals familiar with your circumstances.
Which accounts may be subject to RMDs?
Traditional, SEP, and SIMPLE IRAs are generally subject to RMDs, as are many 401(k), 403(b), 457(b), profit-sharing, and other defined contribution plans. Roth IRAs have no lifetime RMDs for the original owner. Inherited accounts follow separate beneficiary rules and require their own review.
Account rules differ
Traditional IRAs generally follow age-based RMD rules even if the owner still works. A current employer’s workplace plan may allow a delay until retirement, depending on the plan and ownership rules. A former employer’s plan may be treated differently. Review the plan document rather than assuming one rule covers every account.
| Account type | General treatment for original owner | Planning question |
|---|---|---|
| Traditional, SEP, or SIMPLE IRA | Generally subject to RMDs | Which accounts and balances must be included? |
| 401(k), 403(b), or similar plan | Generally subject to RMDs | Does a still-working exception apply? |
| Roth IRA | No lifetime RMDs | Are beneficiary records current? |
| Inherited retirement account | Separate rules apply | Which beneficiary rule and deadline apply? |
Create one complete inventory
List every IRA, current and former employer plan, Roth account, and inherited account. For each, record the owner, custodian, account type, prior year-end balance, and beneficiary status. Note whether the owner still works for the plan sponsor. Include old accounts that have not been consolidated.
Inherited accounts should not be grouped with accounts you funded yourself. Record the original owner’s name, date of death, and your relationship to that person. Beneficiary distribution rules can depend on these details. Ask the custodian or a qualified professional to confirm the applicable rule before taking action.
How is a required minimum distribution calculated?
A required minimum distribution generally equals the retirement account’s balance at the end of the prior calendar year divided by an applicable IRS life expectancy factor. Most IRA owners use the Uniform Lifetime Table. Different tables or rules may apply based on spouse, beneficiary, and account details.
Confirm both inputs
The formula is simple, but the inputs require care. First, confirm the prior December 31 account balance. Then confirm the correct IRS distribution period for the owner’s age and circumstances. Divide the balance by that factor to estimate the year’s required amount.
A different table may apply when the spouse is the sole beneficiary and is more than ten years younger. Inherited accounts can follow other methods. Rollovers and year-end transfers can also complicate the balance used. Ask the custodian to explain its calculation, then compare it with your full account inventory.
Track calculations by account
- List every account that may have an RMD requirement.
- Confirm each prior year-end balance with the custodian.
- Confirm the correct IRS table and distribution factor.
- Calculate and record the required amount for each account.
- Confirm whether permitted aggregation rules apply.
- Arrange withdrawals and save completion records.
Some eligible IRA RMD amounts may be aggregated and withdrawn from one or more IRAs. That does not mean every retirement account can be combined. Workplace plans may require separate handling. Keep an account-level calculation and completion record even when aggregation is permitted.
Explore a coordinated planning process for retirement income and RMD decisions.
Should you delay your first RMD?
Delaying the first RMD until the following April may keep funds in the account longer, but it also places the first and second RMDs in one calendar year. The choice should be compared across both years, including expected income, taxes, spending needs, charitable plans, and other withdrawals.
Compare both calendar years
Taking the first RMD during the year you turn 73 spreads the first two required withdrawals across separate calendar years. Waiting until the following April can produce two distributions in the second year because the next RMD generally remains due by December 31.
Start with an income estimate for both years. Include wages, pensions, Social Security, investment income, and planned retirement withdrawals. Also note unusual income events and expenses. The retirement income planning checklist offers a useful framework for collecting these moving parts.
Review connected decisions
- Would taking the first RMD earlier create a more even income pattern?
- Are other retirement account withdrawals already planned?
- Could two distributions affect estimated tax payments or income-based costs?
- Are charitable gifts or cash needs expected in either year?
- Is a Roth conversion strategy being discussed?
A tax professional can compare possible tax effects. A financial professional can review cash flow and account holdings. Begin well before the selected withdrawal date so there is time to confirm the amount and process instructions.
Coordinate RMDs with taxes, cash flow, and giving
An RMD is a required withdrawal, but it is also one part of a wider retirement income plan. Review the distribution beside spending needs, tax withholding, portfolio holdings, charitable goals, and other sources of income. Coordination can reduce rushed decisions near year-end.
Plan cash flow and withholding
Decide whether a monthly distribution, one payment, or another schedule fits expected spending. If the cash is not needed immediately, discuss what should happen to the after-tax proceeds. Review federal and state withholding elections with a tax professional rather than relying on a default.
Higher taxable income can also affect other income-based costs. Ask a qualified professional about the possible effects before making a timing choice. Hoxton Planning & Management LLC can help organize the planning conversation across retirement income, account details, and long-term priorities.
Review charitable goals
A qualified charitable distribution, or QCD, is a direct transfer from an eligible IRA to an eligible charity that may satisfy part or all of an RMD when IRS requirements are met. Confirm eligibility and transfer steps before funds leave the IRA. A payment made to the account owner first is not a direct QCD.
Read more about charitable giving strategies in retirement, then bring questions to the custodian and tax professional. Do not assume a charitable transfer will receive a specific tax treatment without confirming the current rules.
A yearly RMD planning checklist
A repeatable checklist turns the annual distribution into a documented process. Start early enough to correct missing records, resolve unclear calculations, and process charitable transfers. Assign a date and responsible person to each step.
- Update the account inventory. Add rollovers, inheritances, and account changes.
- Confirm deadlines. Note the first-year April option and each December 31 deadline.
- Verify calculations. Check balances, tables, and custodian estimates.
- Coordinate the plan. Review cash flow, withholding, charitable goals, and portfolio implications.
- Submit instructions early. Allow time for custodian processing and corrections.
- Document completion. Save amounts, dates, confirmations, and tax forms.
Review the checklist after any major life or account change. Beneficiary updates, job changes, rollovers, and inherited assets can change the questions that need attention. Keep records in one place so every professional involved works from the same information.
Common RMD planning mistakes to avoid
Many avoidable problems begin with incomplete records or assumptions. One custodian may not know about accounts held elsewhere. An old workplace plan may have a different process. A beneficiary account may follow a rule that does not apply to an original owner.
- Missing an IRA or former employer plan.
- Using the wrong year-end balance or IRS table.
- Assuming all account types can be aggregated.
- Waiting too long to process a QCD or other distribution.
- Delaying the first RMD without comparing two tax years.
- Failing to keep confirmation records.
A missed or insufficient RMD may have tax consequences. If a mistake occurs, contact the custodian and a tax professional promptly. Do not try to correct a complex issue based only on a general article.
Questions to ask each custodian
Custodians provide important account-level information, but their systems may not show the full household picture. Ask each firm to confirm the account type, prior year-end balance, calculated RMD, processing deadline, available withdrawal methods, and expected delivery time. Also ask how it handles tax withholding and qualified charitable distributions.
For a workplace plan, ask whether a still-working exception is available and whether ownership rules affect it. For an inherited account, ask which beneficiary information the firm has on file and what distribution schedule it is using. Save written responses with the annual checklist. Clear records make it easier to spot conflicting assumptions before money moves.
Build a simple annual review calendar
Spread the work across the year instead of treating RMD planning as a December task. Early in the year, update the account inventory and collect prior year-end statements. In spring, verify calculations and discuss tax questions. By summer, compare cash flow and charitable goals. In early fall, confirm instructions and processing times.
Leave a final review window before year-end. Compare completed withdrawals with the calculated requirement for every account. Confirm that any intended charitable transfer reached the eligible organization directly. Check withholding records and save distribution confirmations. This schedule provides time to resolve discrepancies without relying on last-minute processing.
Coordinate professionals without losing ownership
A custodian, tax professional, and financial professional may each support a different part of the process. The custodian explains account procedures and executes instructions. The tax professional can discuss tax reporting and withholding. The financial professional can help place distributions within the wider retirement plan. Clarify who is responsible for each step.
Even when professionals assist, the account owner remains responsible for tracking completion. Keep one master list that shows the calculated amount, planned source, requested date, completed date, and confirmation number. Share relevant updates so each professional works from current information. This simple control can prevent duplicate requests and missed accounts.
Frequently Asked Questions
How is the required minimum distribution amount calculated?
An RMD generally equals the prior year-end account balance divided by the applicable IRS life expectancy factor. Most IRA owners use the Uniform Lifetime Table, although a different table may apply in some cases. Confirm the balance and factor for each account every year.
Can I defer my first required minimum distribution?
The first RMD may generally be delayed until April 1 of the year after reaching age 73. The next RMD is still generally due by December 31 of that same year, which can result in two taxable distributions in one calendar year.
Are Roth IRAs subject to required minimum distribution rules?
Roth IRAs do not require distributions while the original owner is alive. Beneficiaries may face separate distribution rules after the original owner’s death, so inherited Roth accounts need their own review.
What are some effective RMD planning strategies?
Useful planning steps include inventorying accounts, estimating future RMDs, comparing first-year timing, coordinating withdrawals with taxes and cash flow, reviewing charitable goals, and documenting every completed distribution.
Prepare before the first distribution deadline
Required minimum distribution planning is easier when accounts, dates, and questions are organized before age 73. Start with an inventory. Confirm the rules for each account. Then compare timing, cash flow, taxes, and charitable goals with the professionals who understand your full circumstances.
Schedule a planning conversation with Hoxton Planning & Management LLC.
This article contains general information that is not suitable for everyone and was prepared for informational purposes only. Nothing contained herein should be construed as a solicitation to buy or sell any security or as an offer to provide investment advice. Hoxton Planning & Management LLC is a registered investment adviser.