Required minimum distributions — the retirement account rules that change everything

This article is for educational purposes only and does not constitute medical, legal, or financial advice. Every family situation is different, and you should consult with appropriate professionals about your specific circumstances.

You get a letter or statement from your parent's IRA custodian, and it mentions something about a required minimum distribution. The number is larger than expected, or smaller. Maybe it wasn't supposed to happen yet. You feel that familiar weight settle in your chest—the one that comes when you realize there's another financial rule you didn't know existed, and your parent's money is somehow affected by it.

Required minimum distributions sound like something only accountants should understand. But you're here because you're trying to help your parent manage their money, and suddenly this became your problem too. The thing about RMDs is that they're not optional, despite the word "minimum" making them sound negotiable. If your parent misses one, the IRS doesn't send a friendly reminder. It sends a penalty that eats into the very retirement savings your parent needs to live on.

Here's what nobody tells you clearly: once your parent turns 73, the government owns a say in how much money they must withdraw from certain retirement accounts every single year. This rule exists because the government originally gave a tax break when that money went in, and now it wants its taxes. Understanding this now, before there's a missed deadline, might save you months of confusion and your parent thousands of dollars in penalties.

This affects you because you're probably helping manage bills, reviewing statements, or trying to figure out whether your parent has enough money to cover care costs. An unexpected RMD can change your parent's tax situation, affect their Medicare premiums, or drain resources you thought were reserved for something else. It's worth understanding what's happening and why.

Understanding the Basics

An RMD is the minimum amount the IRS says your parent must withdraw each year from certain retirement accounts. These accounts include traditional IRAs, SEP-IRAs, SIMPLE IRAs, and employer retirement plans like 401(k)s and 403(b)s. Roth IRAs are different, so if your parent has one, that account doesn't trigger RMDs during their lifetime. Roth accounts pass through to heirs with different rules, but your parent gets a free pass while alive.

The age used to be 70.5, then it moved to 72, and as of 2023, it's 73. If your parent was born before 1950, it's 73. If they're younger than that, it might be 74 or even older depending on the year they were born. This matters because the IRS is slowly raising the age, trying to let money sit longer before forcing withdrawals.

Why does the government care how much your parent takes out? Because when your parent put money into that traditional IRA decades ago, they probably got a tax deduction. That money grew tax-free all those years. Now the government says, "You've had your tax break long enough. Start paying taxes on this money." The RMD forces your parent to pay taxes on at least some of that growth.

The amount your parent must withdraw each year is calculated with a specific formula. The IRS publishes life expectancy tables called divisors. Your parent's account balance on December 31st of the previous year gets divided by the divisor for their age. So if your parent is 75 and has $500,000 in a traditional IRA, and the divisor for age 75 is 24.6, they must withdraw at least $20,325 that year. If they don't, they're supposed to pay a penalty of 25% on the amount they didn't withdraw. That's not a small fine. That's a quarter of the money gone to the IRS.

The distribution must happen by December 31st each year, with one exception for the very first RMD, which can wait until April 1st of the year after your parent turns 73. Most people take it that December 31st anyway because delaying until April 1st means taking two RMDs in the same year, which creates a double tax hit that year.

Your parent can take more than the minimum anytime they want. If their RMD is $20,000 but they need to withdraw $30,000, that's fine. The IRS only cares that at least the minimum gets taken. Some families do this strategically when they need the money anyway. Others find that the RMD is more than they need, which creates its own tax problem.

Here's where it gets complicated for your parent's care situation. If your parent is in assisted living or needs in-home care, that costs real money. Sometimes those costs come from regular income like pensions or Social Security. Sometimes they come from savings. Sometimes they come from the RMD. If your parent has multiple retirement accounts, they can choose which account the distributions come from, but they must take the total amount across all accounts. A parent with three IRAs can't satisfy their RMD by taking it entirely from one account and ignoring the others. They have to track the total across all three.

If your parent has an employer retirement plan, like a 401(k) from the company they worked for, the rules can be slightly different. They might be able to delay the RMD a little longer if they're still working, but once they retire completely, the clock starts. And if they have inherited retirement accounts from someone else's estate, those have entirely different RMD rules. Inherited accounts can trigger bigger distributions, sometimes over just a few years, which is a major tax event.

Your Parent's Specific Situation

To understand how RMDs affect your parent, you need to answer several questions. First, does your parent have any traditional retirement accounts at all? Not everyone does. Some people have pensions, some have only Roth IRAs, some have very little retirement savings. If your parent doesn't have traditional IRAs or employer plans, then RMDs don't affect them. But if they do, you need to know.

Pull together the statements for every retirement account your parent has. Write down the institution, the account number, the type of account, and the December 31st balance from last year. If your parent has already turned 73, you need to know whether they've taken their first RMD yet. If they turned 73 last year and haven't withdrawn anything, that first RMD deadline is coming up fast. Many people don't know they missed this deadline until the IRS tells them about it in a penalty notice.

Ask your parent if they know what their RMD is supposed to be. Some custodians calculate it and tell the account holder automatically. Others don't. If your parent's bank hasn't told them anything, you might need to call the bank and ask them to calculate it. Or you can calculate it yourself using the IRS tables and the account balance. Online RMD calculators exist too, though you'll want to double-check the math because this is a place where errors cost money.

Another important question is whether your parent has already taken distributions this year. If they have, that might count toward their RMD if they took it from the right account at the right time. If they've been carefully withdrawing money to cover their expenses, that might accidentally fulfill their RMD. Or it might not, if the amounts were wrong or the timing was off. This matters because the IRS cares about the calendar year, not a rolling 12-month period.

Ask your parent what they intend to do with the RMD money once they withdraw it. Some people need that money to live on. Others need to withdraw it because the law says so but don't need the money. Those are two different situations. If your parent doesn't need the money, they might want to move it to a taxable brokerage account or reinvest it somehow. That's a strategic decision that affects their taxes.

Has your parent inherited any retirement accounts from a spouse or someone else? Inherited accounts changed dramatically after the SECURE Act in 2019. Depending on when the inheritance happened and who inherited it, the rules for taking distributions are different. A spouse inheriting an IRA can treat it as their own and delay distributions. A non-spouse inheritor usually has much shorter timelines. This is complex and worth getting professional help with.

What's your parent's overall tax situation? RMDs are taxable as ordinary income. If your parent takes a large RMD and also has other income like a pension or Social Security, their total income might push them into a higher tax bracket. Or if they're close to certain thresholds, an RMD might cause their Medicare premiums to increase. Medicare premiums are based on modified adjusted gross income from two years prior, so an RMD taken now affects premiums two years from now. That seems random, but the government calls it IRMAA and it can add thousands of dollars to Medicare costs.

Taking Next Steps

The first step is knowing your parent's RMD requirements for the current year. If your parent hasn't turned 73 yet, you can skip this for now, but mark your calendar for the year they turn 73. The deadline for that first RMD is April 1st of the following year. If your parent is already past 73 and hasn't taken anything, you need to take action now. Every year that passes without an RMD creates compound penalties and complications.

Call the institution holding your parent's retirement accounts. Ask them what the RMD is for the current year and whether your parent has already taken one. Get the exact amount in writing. Don't rely on an email or a voicemail. Ask them to confirm it in your parent's online account or send a formal statement. This becomes your documentation.

Decide where the distribution should come from. If your parent has multiple traditional IRAs, this can be strategic. Some people like to clean up small accounts by taking distributions from them first. Others prefer to keep money in the account they trust most. If your parent has a 401(k), the distribution usually comes from that account unless they've rolled it into an IRA. If they have employer plans and IRAs both, the distributions must add up across both types, but they can choose which accounts to draw from.

Schedule the distribution in advance if possible. If the deadline is December 31st, don't wait until December 15th to request it. Financial institutions sometimes take weeks to process distributions, especially if they need to set up a check. Wire transfers or direct deposits from brokerages happen faster, but they still require lead time.

Talk to your parent's tax advisor or accountant about the impact. This matters if your parent's tax situation is complicated. If they have a large RMD, it might be worth considering whether they should make quarterly estimated tax payments. If they're on Medicare, they should understand that this RMD will affect premiums two years from now. If they're trying to manage their income to stay below a certain threshold for a benefit, the RMD might block that.

You might also want to consult with an attorney if your parent isn't able to make these decisions themselves. If your parent has cognitive changes or has signed power of attorney to you, you need to understand whether you can authorize RMD distributions. Some financial institutions are cautious about taking distributions when someone other than the account owner requests them, even with a power of attorney. Getting written documentation that you have the authority saves time and confusion later.

If penalties have already been assessed, there's a process to request abatement if your parent was truly unaware of the rule. The IRS doesn't forgive many penalties, but first-time mistakes can sometimes be waived if you request it with reasonable cause. A tax professional can help with this, but you have to request it formally. It doesn't happen automatically.

Create a simple system so this doesn't surprise your parent or you again next year. Write down the RMD amount, the deadline, and which account it comes from. Put that information somewhere you both can see it. Some families create a simple spreadsheet. Others use a calendar reminder or a note on the phone. The method doesn't matter. What matters is that someone remembers to make it happen.

Required minimum distributions feel like a punishment at first, like the government is taking more of your parent's money. In reality, it's the government collecting taxes it delayed from decades ago. Understanding this rule, taking action before deadlines, and planning for the tax impact is the difference between this being a straightforward annual transaction and it becoming a crisis when penalties hit. Your parent worked hard for that money. Making sure it goes to their care instead of unnecessary penalties means you're protecting one of their most important assets.

How To Help Your Elders is an educational resource. We do not provide medical, legal, or financial advice. The information in this article is general in nature and may not apply to your specific situation. If you are concerned about a loved one's cognitive health or safety, consult with their healthcare provider or contact your local Area Agency on Aging for guidance and support.