Q1 2026 Wealth Strategy Insights

by Phil Scavo, MBA, CFP® Manager of Wealth Planning

Required Minimum Distributions: A Guide to RMDs

Required Minimum Distributions (RMDs) are the minimum amounts the IRS requires you to withdraw each year from retirement accounts such as IRAs, 401(k)s, or similar plans once you reach a certain age. Understanding RMDs helps you plan for taxes, avoid penalties, support retirement income, and manage estate planning.

This guide explains RMD basics, calculations, inherited IRA rules, the fiveyear and ten-year distribution rules, and pre-SECURE Act provisions. Because these rules change frequently, consult your advisor, a tax professional, or IRS guidance before making distributions.

When to Start Taking RMDs

• For your own retirement accounts, RMDs currently begin at age 73 (in 2026 for individuals born in 1953).

• For inherited IRAs, requirements depend on who inherits the account, when it is inherited, and whether the original owner had already begun taking RMDs.

• Roth IRAs are not subject to RMDs during the original owner's lifetime.

• RMDs are generally taxed as ordinary income for federal tax purposes, although state taxation varies. Planning withdrawals carefully can help improve tax efficiency.
  

How Are RMDs Calculated?

RMDs are calculated by dividing the account balance as of December 31 of the previous year by a life expectancy factor from IRS tables. These factors vary depending on age and beneficiary status. See IRS Publication 590-B for details.

Your Own IRA

Use Table III (Uniform Lifetime Table) if your spouse is not the sole beneficiary or is not more than 10 years younger than you.

If your spouse is more than 10 years younger, Table II (Joint and Last Survivor Expectancy) may apply. This table provides a longer life expectancy factor and results in smaller required withdrawals.

For example, a $100,000 IRA balance divided by the applicable life expectancy factor determines the annual RMD.

RMDs must generally be taken by December 31 each year. Your first RMD may be delayed until April 1 of the year after you turn 73, but doing so requires taking two withdrawals in that same calendar year.

Inherited IRAs (Post-SECURE Act)

Non-spousal beneficiaries typically use Table I (Single Life Expectancy) based on their age at inheritance.

Spousal beneficiaries may treat the IRA as their own and use Table III, allowing them to delay RMDs until age 73.

Because calculations vary depending on beneficiary type and age, consult IRS tables with your advisor or tax professional.

Rules for Inherited IRAs

Inherited IRA rules depend on the type of beneficiary.

Spousal Beneficiaries

Spouses generally have the most flexibility. They may:

● Roll the IRA into their own retirement account

● Stretch RMDs over their life expectancy

● Keep the account as an inherited IRA

Non-Spousal Beneficiaries

Two categories apply.

1. Eligible Designated Beneficiaries

This group includes:

● Minor children of the original account holder

● Individuals who are chronically ill or permanently disabled

● Individuals who are not more than 10 years younger than the original account holder These beneficiaries may take distributions based on their life expectancy.

2. Non-Eligible Designated Beneficiaries

If you do not qualify as an eligible designated beneficiary and the account holder died after 2019, the entire IRA must generally be distributed within ten years.

If the original owner had already reached RMD age, annual RMDs must also be taken during the ten-year period.

Non-Individual Beneficiaries

These include estates, charities, or organizations.

Distribution Options

1. Five-Year Rule

Who it applies to: Typically applies to non-individual beneficiaries, such as estates, trusts, or charities, when the IRA owner died before reaching RMD age and the beneficiary does not qualify for lifetime withdrawals. This rule is rarely used for individuals after the SECURE Act.

Details: The IRA must be fully distributed by December 31 of the fifth year after the owner’s death. No annual RMDs are required.

Example: If you inherit $50,000 in 2026, the account must be fully withdrawn by 2031.

2. Ten-Year Rule

Who it applies to: Most non-spousal designated beneficiaries inheriting IRAs after December 31, 2019 fall under the ten-year rule unless they qualify as eligible designated beneficiaries.

Details: The IRA must be fully distributed by December 31 of the tenth year following the owner’s death. If the decedent had already reached age 73, non-eligible designated beneficiaries must also take annual RMDs during the ten-year period.

Example: A 50-year-old inheriting a $100,000 IRA in 2026 would take annual RMDs while ensuring the account is fully distributed by 2036.

Eligible designated beneficiaries may instead take lifetime RMDs.

3. When the Decedent Had Already Reached RMD Age

Who it applies to: If the IRA owner died at or after age 73, beneficiaries must generally continue annual RMDs based on either:

● the decedent’s remaining life expectancy, or

● the beneficiary’s life expectancy, whichever is longer.

Example: A trust inheriting a $100,000 IRA from a 75-year-old would take RMDs based on the decedent’s remaining life expectancy.

If the five-year rule is elected, the account must be emptied within five years without annual RMDs.

4. Spousal Beneficiary Options

Who it applies to: Spouses may:

● Roll the IRA into their own account and begin RMDs at age 73, or

● Keep it as an inherited IRA and begin RMDs when the deceased spouse would have turned 73

Example: A 60-year-old spouse inheriting a $100,000 IRA could delay RMDs until age 73.

5. Pre-SECURE Act Rules

Who it applies to: Before the SECURE Act, non-spousal beneficiaries could stretch RMDs over their lifetime using Table I, allowing smaller annual withdrawals and extended tax deferral.

Example: A 50-year-old inheriting $100,000 in 2015 could spread withdrawals over decades.

This option ended for most beneficiaries for deaths occurring after December 31, 2019, except for spouses and eligible designated beneficiaries.

Penalties to Avoid

Missing an RMD triggers a 25% penalty on the amount not withdrawn, which may be reduced to 10% if corrected within two years.

Example: Missing a $4,000 RMD could result in a $1,000 penalty, or $400 if corrected promptly. You may request a waiver for reasonable errors by filing IRS Form 5329.

Things to Think About

Timing: Delaying your first RMD until April 1 means taking two distributions in the same year, which may increase taxable income.

Taxes: RMDs increase taxable income and may move you into a higher tax bracket.

If you are age 70½ or older and charitably inclined, consider a Qualified Charitable Distribution (QCD). You may donate up to $111,000 in 2026 directly from your IRA to a qualified charity. The distribution counts toward your RMD but is excluded from taxable income.

Income Planning: Even if you can wait until the tenth year to distribute an inherited IRA, you may choose to take withdrawals earlier to manage taxes.

Example: withdrawing $5,000 annually from a $50,000 inherited IRA may help smooth income over time.

Inheritance Planning: Spouses have flexible options, while other beneficiaries face stricter rules. Discuss plans with heirs, tax professionals, and your advisor.

Penalties: Setting reminders or working with an advisor can help ensure RMD deadlines are met and avoid penalties.

How Parallel Advisors Can Help

RMD rules can be complex. Calculating distributions correctly is essential to avoid penalties and unnecessary taxes.

Parallel Advisors helps ensure your RMDs are accurate and timely based on the appropriate IRS life expectancy tables. Whether you are managing multiple retirement accounts or navigating an inherited IRA, we provide guidance to help keep your financial plan on track while complying with IRS requirements.

Helpful Links

IRS – Retirement Topics – Required Minimum Distributions (RMDs)

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