RMDs at 73 and How Rollovers Affect Your Required Distributions

Understanding Required Minimum Distributions at Age 73

The SECURE 2.0 Act pushed the RMD starting age to 73 for those born between 1951 and 1959, and to 75 for those born in 1960 or later. But here’s what many people miss: how you handle rollovers in the years before RMDs begin can dramatically affect your required distributions for life.

How RMDs Are Calculated

Your RMD equals your IRA balance on December 31 of the previous year divided by a life expectancy factor from IRS tables. For a 73-year-old, that factor is approximately 26.5 years.

Example: $500,000 balance ÷ 26.5 = $18,868 RMD for the year

This amount is taxed as ordinary income. The larger your IRA balance, the larger your RMD, and the higher your tax bill.

Consolidating Accounts Before RMD Age

If you have multiple IRAs, 401(k)s, and other retirement accounts scattered across various custodians, consolidation before age 73 simplifies everything. You can aggregate all IRA balances and take your total RMD from any single IRA or combination of IRAs.

401(k)s are different. Each 401(k) RMD must be taken from that specific 401(k). You cannot satisfy a 401(k) RMD by withdrawing from an IRA. This is why many people roll their 401(k)s into IRAs before RMD age—maximum flexibility.

The Still-Working Exception for 401(k)s

If you’re still employed at age 73 and don’t own more than 5% of the company, you can delay RMDs from your current employer’s 401(k) until you retire. This exception does not apply to:

• IRAs (RMDs begin at 73 regardless of employment)
• Old 401(k)s from previous employers
• Self-employed individuals with significant ownership

For someone planning to work until 75 or 80, rolling old 401(k)s into the current employer’s plan (if allowed) can delay RMDs on those funds. Rolling them into an IRA would trigger immediate RMD requirements at 73.

Roth Conversions: The Pre-RMD Strategy

Once RMDs begin, you cannot convert the RMD amount to a Roth. You must take the RMD first, then convert any additional amount you choose.

This makes the years between retirement and age 73 critical. If you retire at 65, you have 8 years to strategically convert traditional IRA funds to Roth at potentially lower tax brackets. Every dollar converted is a dollar that never faces RMDs.

Example conversion strategy:

• Age 65-72: Convert $75,000 annually, staying within the 22% bracket
• Total converted: $600,000
• Tax paid on conversions: approximately $132,000
• RMDs avoided on this amount: $22,600+ annually starting at 73
• Tax-free growth and withdrawals for life

How Rollovers Affect Your RMD Calculation

A rollover completed by December 31 affects the following year’s RMD. If you roll $200,000 from a 401(k) into your IRA on November 15, that $200,000 becomes part of your December 31 IRA balance and increases your RMD for the next year.

Timing matters. If you want to delay the impact:

• Complete rollovers in January, not December
• The funds won’t be in the December 31 balance
• Your next RMD won’t include the rollover amount

The First Year RMD Trap

You can delay your first RMD until April 1 of the year after you turn 73. But this creates a double-RMD problem in year two. You’ll take two RMDs in the same calendar year—potentially pushing you into a higher tax bracket, increasing Medicare premiums via IRMAA, and making more Social Security benefits taxable.

Most financial advisors recommend taking your first RMD by December 31 of the year you turn 73. Pay the tax on schedule rather than doubling up.

Quarterly RMD Payments

You can take your RMD in any pattern: monthly, quarterly, or as a lump sum. Many retirees take quarterly distributions and have taxes withheld, treating it like a paycheck. Others take the full amount in December to maximize the year’s growth. Neither approach changes the math—just your cash flow preferences.

What matters is meeting the deadline. Miss your RMD, and the penalty is 25% of the amount not withdrawn—reduced to 10% if corrected promptly. Plan your rollovers and withdrawals carefully as RMD age approaches.