The math
The required withdrawal grows for about twenty years.
The first required withdrawal from a traditional IRA is small. It is easy to plan your taxes around it. The withdrawals that matter come later, because the table makes them grow for many years.
The rule
You must take money out of a traditional IRA each year, from the year you reach the required age. The age is 73. If you reach age 74 after December 31, 2032, the age is 75.
The amount is the balance at the end of the prior year, divided by a factor for your age. The factor comes from the Uniform Lifetime Table in the tax regulations. The rules do not apply to a Roth IRA while the owner is alive.
The share goes up every year
| Age | Factor | Share you must take | Withdrawal on $1,000,000 at 75, 6% return |
|---|---|---|---|
| 75 | 24.6 | 4.1% | $40,650 |
| 80 | 20.2 | 5.0% | $52,936 |
| 85 | 16.0 | 6.2% | $67,676 |
| 90 | 12.2 | 8.2% | $82,780 |
| 95 | 8.9 | 11.2% | $93,109 |
| 100 | 6.4 | 15.6% | $86,950 |
At 75, the factor is 24.6, so you must take 4.1% of the balance. At 90, you must take 8.2%. At 100, you must take 15.6%.
The balance grows at first
The early shares are small. At a 6% return, the account earns more each year than you must take out. So the balance grows, and next year's withdrawal is larger.
In our example, the balance reaches its peak at age 84, at $1,086,179. From that age, each withdrawal is more than the return on the money that stays. The withdrawal still grows after that, because the share rises faster than the balance falls.
The withdrawal reaches its peak at age 97. It is then $93,344, which is 2.3 times the first one. It grows for 22 years.
The return decides the peak
| Return a year | Age of the largest withdrawal | Largest withdrawal | Withdrawal at 90 |
|---|---|---|---|
| 4% | 93 | $64,287 | $62,206 |
| 6% | 97 | $93,344 | $82,780 |
| 8% | 99 | $141,757 | $109,570 |
A higher return moves the peak later and makes it larger. At each return in the table, the largest withdrawal comes 18 to 24 years after the first one.
Why this is a tax question
Each withdrawal from a traditional IRA is taxable income. It is easy to test your tax bracket against the first withdrawal. Test it against the withdrawals in your late 80s and 90s, which are much larger.
By age 90, our example has taken out $971,463, almost the full balance at the start. The account is still large, and the largest withdrawals are still to come.
Two traps in the first year
A late first withdrawal doubles up. You can delay the first withdrawal until April 1 of the next year. But the second one is still due in that same year. Then two withdrawals fall into one tax year.
A missed withdrawal costs extra tax. The IRS can charge a tax of 25% of the amount that you did not take. The rate falls to 10% if you correct the miss within two years.
What to do
Plan for the late withdrawals, not the first one. Run the table forward with your own balance and a realistic return.
Use the low-income years before the required age. A Roth conversion moves money out of the traditional IRA, so later withdrawals are smaller. Our essay on Roth or traditional explains when the trade is worth it.
Take more than the minimum when your tax rate is low. A larger early withdrawal makes the later required ones smaller. Our essay on which pocket you spend from shows the order.
What this leaves out
The model uses one fixed return and no inflation. It takes only the required amount each year and starts at age 75. It does not include a spouse who is much younger, which uses a different table, or accounts that you inherit.
Sources
- 26 CFR section 1.401(a)(9)-9, for the factors in the Uniform Lifetime Table.
- 26 U.S. Code section 401(a)(9)(C)(v), for the required ages of 73 and 75.
- IRS, Retirement plan and IRA required minimum distributions FAQs, for the April 1 rule, the 25% and 10% tax, and the rule for Roth IRAs.