Understanding Required Minimum Distributions at Age 73
Required Minimum Distributions have gotten complicated with all the rule changes flying around. As someone who helped my parents navigate their first RMDs — and made a couple mistakes along the way — I learned everything there is to know about how rollovers interact with RMDs. Today, I will share it all with you.
The SECURE 2.0 Act bumped the RMD starting age to 73 for people born between 1951 and 1959, and to 75 for anyone born 1960 or later. Good news, right? More time for tax-deferred growth. But here’s what a lot of people miss: how you handle rollovers in the years before RMDs kick in can dramatically change the size of your required distributions for the rest of your life.
How RMDs Are Calculated
The formula is straightforward: take your IRA balance on December 31 of the previous year and divide it by a life expectancy factor from the IRS tables. At 73, that factor is approximately 26.5 years.
Example: $500,000 balance / 26.5 = $18,868 RMD for the year
That entire amount gets taxed as ordinary income. Bigger IRA balance means bigger RMD, which means a bigger tax bill. This is why getting strategic about your pre-RMD years matters so much.
Consolidating Accounts Before RMD Age
If you’ve got retirement money scattered across multiple IRAs, old 401(k)s, and various custodians — and let’s be honest, most of us do after a few job changes — consolidation before 73 makes life way simpler. With IRAs, you can add up all your balances and then take the total RMD from whichever IRA or combination of IRAs you want. Nice and flexible.
401(k)s? Totally different story. Each 401(k) RMD must come from that specific 401(k). You can’t satisfy a 401(k) RMD by pulling from an IRA. That’s the big reason so many people roll their old 401(k)s into IRAs before RMD age — maximum flexibility in how and where you take distributions.
The Still-Working Exception for 401(k)s
Here’s a wrinkle that catches people off guard. If you’re still working at 73 and don’t own more than 5% of the company, you can hold off on RMDs from your current employer’s 401(k) until you actually retire. Pretty handy for people who plan to keep working.
But this exception has limits. It does NOT apply to:
- IRAs — your RMDs start at 73 no matter what, even if you’re still punching a clock
- Old 401(k)s from previous employers
- Self-employed folks with significant ownership stakes
So if you’re planning to work until 75 or 80, here’s a move worth considering: roll those old 401(k)s into your current employer’s plan (assuming they allow it). This can delay RMDs on those funds. Roll them into an IRA instead, and boom — you’ve triggered RMD requirements the moment you hit 73.
Roth Conversions: The Pre-RMD Strategy
That’s what makes the pre-RMD window endearing to us retirement planners — it’s this incredible opportunity most people don’t fully appreciate until it’s closing.
Once RMDs begin, you can’t convert the RMD amount to a Roth. You have to take the RMD first, then convert any additional amount beyond that. This rule essentially shrinks your conversion runway.
Which is why the years between retirement and age 73 are so critical. If you retire at 65, you’ve got 8 years to strategically shift traditional IRA dollars into a Roth at what might be the lowest tax brackets you’ll ever see. Every dollar you convert is a dollar that will never be subject to RMDs. Ever.
Example conversion strategy:
- Age 65-72: Convert $75,000 annually, staying within the 22% bracket
- Total converted over 8 years: $600,000
- Tax paid on those conversions: approximately $132,000
- RMDs avoided on that $600K: $22,600+ annually starting at 73
- Plus tax-free growth and withdrawals for the rest of your life
That’s a trade-off I’d make any day of the week.
How Rollovers Affect Your RMD Calculation
Here’s a timing detail that matters more than most people realize. A rollover that lands before December 31 affects the following year’s RMD. So if you roll $200,000 from a 401(k) into your IRA on November 15, that $200,000 shows up in your December 31 balance and pumps up your RMD for next year.
If you want to delay the impact:
- Complete rollovers in January, not December
- Those funds won’t be sitting in the December 31 balance
- Your next RMD won’t include the rollover amount
It’s the same money either way, but a few weeks of timing can make a real difference in your tax bill.
The First Year RMD Trap
Probably should have led with this section, honestly. You’re allowed to delay your very first RMD until April 1 of the year after you turn 73. Sounds like a nice break, right? It’s actually a trap.
Because now you’re taking two RMDs in the same calendar year — your delayed first-year RMD plus your regular second-year RMD. That double dose can push you into a higher tax bracket, spike your Medicare premiums through IRMAA surcharges, and make more of your Social Security benefits taxable. It’s a cascade of tax consequences.
Almost every financial advisor I’ve talked to recommends just taking that first RMD by December 31 of the year you turn 73. Pay the tax on schedule and avoid the double-up mess.
Quarterly RMD Payments
You’ve got total flexibility on timing within the year. Monthly, quarterly, lump sum in December — it’s your call. A lot of retirees I know take quarterly distributions with taxes withheld, which basically feels like getting a paycheck again. Others wait until December and take the whole thing at once, letting the money grow as long as possible. The math doesn’t really change either way — it’s more about what works for your cash flow.
What absolutely matters is hitting the deadline. Miss your RMD and you’re looking at a 25% penalty on the amount you should have withdrawn. That drops to 10% if you correct it quickly, but why put yourself through that? Plan your rollovers and withdrawals carefully as RMD age approaches. Your future self will thank you.
