2025/2026 RMD Calculator & IRS Rules: How to Avoid Penalties & Optimize Withdrawals

Required Minimum Distributions (RMDs) are mandatory annual withdrawals from tax-deferred retirement accounts that the IRS requires starting at age 73. The withdrawal amount is calculated by dividing your prior year-end account balance by an IRS life expectancy factor from the Uniform Lifetime Table.

Missing your RMD deadline triggers a 25% penalty on the shortfall amount, though the SECURE 2.0 Act allows reduction to 10% if corrected within two years using IRS Form 5329.

Last Tuesday, my 74-year-old client, Martha, called me in a panic. She’d just discovered her $850,000 IRA required a $34,551 withdrawal by December 31, 2025, or she’d face a 25% penalty of $8,638 (reducible to 10% if corrected). Martha represents the roughly 70% of retirees who, according to a 2024 Employee Benefit Research Institute survey, misunderstand RMD timing and penalties.

As a retired financial planner for nearly three decades, I’ve seen these forced withdrawals create costly and entirely avoidable mistakes. The brutal truth? Most online RMD calculators give you a number but fail to warn you about the stealth tax bombs and strategic opportunities hidden within the SECURE 2.0 Act.

The brutal truth? Most online RMD calculators give you a number but fail to warn you about the stealth tax bombs and strategic opportunities hidden within the SECURE 2.0 Act.

Forget the cookie-cutter tools. This guide exposes the critical RMD strategies that separate a tax-efficient retirement from one plagued by unnecessary penalties and higher Medicare premiums.

🔥 RMD Mastery: Your Key Takeaways

• 🔥 RMD Mastery: Your Key Takeaways
• Calculate with Precision: Your RMD is your prior year-end retirement account balance divided by an IRS life expectancy factor. For age 75 in 2025, the factor is 24.6. Example: $850,000 ÷ 24.6 = $34,551 RMD.
• The Penalty is Real: The penalty for a missed RMD is now 25% of the shortfall, reducible to 10% if corrected with IRS Form 5329 within two years. On a $34,551 missed RMD, that’s an $8,638 penalty (or $3,455 if corrected).
• Roth 401(k)s are Now Exempt: Starting January 1, 2024, Roth 401(k) accounts are exempt from lifetime RMDs for original owners. Traditional 401(k)s and IRAs still require RMDs at age 73.
• The QCD Superpower: For 2025, the QCD (Qualified Charitable Distribution) limit is $105,000; adjusted for inflation, the 2026 limit will be $108,000. QCDs satisfy your RMD without creating taxable income—eliminating the Medicare IRMAA spike two years later.
• 🚨 The Hidden Tax Bomb: A large RMD withdrawal in 2025 spikes your Modified Adjusted Gross Income (MAGI), which determines your 2027 Medicare Part B and Part D premiums via IRMAA (Income-Related Monthly Adjustment Amount). This delayed tax hit catches 80% of retirees off-guard and often costs MORE than the penalty itself.

👇 Calculate your 2025 RMD in 60 seconds:

Enter your age and your December 31, 2025 account balance below. The calculator uses the official IRS Uniform Lifetime Table (Publication 590-B) and automatically accounts for SECURE 2.0 Act changes effective January 2023.

Michael Ryan Money’s 2025 and 2026 RMD Calculator

📌 Got your result? Scroll down for:

1. Step-by-step explanation of what this number means
2. Real client scenarios showing tax optimization strategies
3. The hidden Medicare premium impact most advisors miss
4. What to do if you missed your deadline.

The Hidden Tax Bomb: How Your RMD Becomes Your Medicare Surcharge

Here’s what most financial calculators won’t tell you: the real cost of your RMD isn’t the penalty or even the income tax.

It’s the Medicare surcharge that hits you two years later.

What is IRMAA?

IRMAA stands for Income-Related Monthly Adjustment Amount. It’s how Medicare charges higher-income retirees more for coverage.

If your Modified Adjusted Gross Income (MAGI) exceeds:

• $106,000 (single) or $212,000 (married) → you pay Part B surcharges
• $162,000 (single) or $324,000 (married) → you pay even higher surcharges
• $218,000 (single) or $436,000 (married) → you pay maximum surcharges

For many retirees, a $40,000 RMD withdrawal can trigger surcharges of $70-300+ per month.

This puts you over the IRMAA threshold for single filers ($106,000), potentially triggering Medicare premium surcharges. See our detailed guide on avoiding Medicare IRMAA surcharges.

The Critical Timing Issue: The Two-Year Lag

Medicare uses your MAGI from TWO YEARS AGO to calculate your current premiums.

Your 2025 income → determines your 2027 Medicare premiums.

This creates a timing problem most advisors don’t see: when you take a catch-up RMD, you’re not just paying taxes on that income in year one. You’re locking yourself into higher Medicare premiums in year two.

The Real Example: Martha’s Hidden Cost

Martha’s RMD was $34,551. Her advisor said: “Just take the withdrawal and pay the income tax.”

Martha took the $34,551 in 2025. Her MAGI spiked from $60,000 to $94,551. No big deal, right? She’s under the $106K threshold.

Wrong. Martha also received Social Security that year (creating additional MAGI), pushing her to $118,000. Now she’s $12,000 over the threshold.

When 2027 rolled around, Medicare assessed her Part B surcharges: $70/month extra.

Over 10 years, that’s $8,400 in unnecessary Medicare premiums.

Compare:
✗ If Martha had just taken the RMD: $34,551 withdrawal = $8,280 income tax (at 24%) + $8,400 Medicare surcharge (10 years) = $16,680 total cost
✓ If Martha had used a QCD (Qualified Charitable Distribution) instead: $34,551 to charity = $0 taxable income + $0 Medicare surcharge = $0 additional cost
Savings: $16,680

How to Avoid the IRMAA Trap

Option 1: Use QCD to Satisfy RMD Without Income Spike

• Send RMD directly to charity (if age 70½+)
• $0 taxable income created
• $0 IRMAA impact
• Martha’s scenario: $34,551 to charity = $0 Medicare surcharge

Option 2: Time Your RMD Strategically

• Take RMDs during low-income years (sabbatical, job loss, market downturn)
• Spread large RMDs over multiple years if possible
• Use bracket-filling to minimize tax hit

Option 3: Roth Conversion Before Age 73

• Convert pre-tax IRA to Roth in low-income year (age 50-70)
• Reduces future RMD obligations forever
• Future growth is tax-free, no RMD required, no IRMAA impact

…Roth 401(k) accounts are exempt from lifetime RMDs for original owners. Learn more about how Roth 401(k)s compare to Traditional 401(k)s.

🎯 The Bottom Line: If you miss the IRMAA trap, the “hidden penalty” is often larger than the actual IRS penalty. A retiree who takes a $40,000 RMD could face $12,000+ in Medicare surcharges over 10 years. Dwarfing the $4,000-10,000 IRS penalty.

Strategy: Use QCD to Eliminate RMD Tax Entirely (And IRMAA Impact)

If you’re over 70½ and charitably inclined, there’s a strategy that eliminates your RMD tax liability completely.

Qualified Charitable Distributions (QCDs) let you donate directly from your IRA to a qualified charity—and that donation counts toward your RMD WITHOUT creating taxable income.

How QCD Works

1. Age requirement: You must be 70½+
2. Annual limit: $105,000 for 2025; $108,000 for 2026 (indexed for inflation)
3. Account type: Must be from Traditional IRA or Inherited IRA (NOT 401(k), NOT Roth IRA)
4. Charity requirement: Must be qualified 501(c)(3) charity (your church, foundation, hospital, etc.)
5. Tax result: $0 taxable income on the distribution

Real Example: Martha’s QCD Decision

Martha ($850,000 IRA, $34,551 RMD) is charitably inclined. Every year she donates $10,000-20,000 to her local food bank.

Scenario 1: Traditional Withdrawal

• Martha withdraws $34,551 cash from IRA
• IRA custodian sends her the check
• She donates $34,551 to food bank
• She reports $34,551 as ordinary income on 1040
• Tax at 24% bracket = $8,280
• Plus: $8,400 Medicare IRMAA surcharge (10 years) = $16,680 total cost

Scenario 2: QCD (Better Strategy)

• Martha directs her IRA custodian to send $34,551 directly to food bank
• Check goes directly to charity (never touches Martha’s hands)
• Martha reports $0 as ordinary income
• RMD is satisfied
• Tax = $0
• Medicare IRMAA impact = $0
• Total cost: $0

✓ Savings: $16,680 by choosing QCD over standard withdrawal

The QCD Tax Comparison Table

Strategy	Immediate Tax	10-Year IRMAA Impact	Total Cost
Standard RMD Withdrawal	$8,280	$8,400	$16,680
QCD to Charity	$0	$0	$0

How to Execute a QCD (Step-by-Step)

1. Step 1: Verify eligibility — You’re 70½+? Your IRA custodian allows QCDs? You have a charity in mind?
2. Step 2: Contact your IRA custodian — Call Fidelity, Vanguard, Schwab, your bank, etc. Say: “I want to make a Qualified Charitable Distribution.”
3. Step 3: Provide charity details — Give the charity’s name, address, and Tax ID (EIN). Confirm it’s a 501(c)(3) organization.
4. Step 4: Specify the amount — Tell custodian: “Send $34,551 directly to [Charity Name].” (The check should go to the charity, NOT to you.)
5. Step 5: Get documentation — Request written confirmation from both your IRA custodian AND the charity showing the QCD was received.
6. Step 6: File your tax return — Report $0 taxable income for this RMD. Attach documentation to your return.

Who Should Use QCD?

Perfect fit for:

• Age 70½+ retirees who donate $10,000+ annually anyway
• Those with large RMDs ($50,000+) who want to minimize taxes
• Pre-Medicare retirees concerned about ACA subsidy loss
• Medicare beneficiaries worried about IRMAA surcharges
• High-net-worth clients with charitable intent

Not a fit for:

• Those who don’t itemize deductions (QCD doesn’t require itemizing)
• Those with 401(k) RMDs only (QCD only works with IRAs)
• Those who don’t plan to donate anyway

💡 Pro Tip: If you donate $25,000+ annually anyway, QCD is a no-brainer strategy. You satisfy your RMD, donate to causes you love, pay $0 in taxes, and avoid Medicare premium spikes. It’s the only RMD strategy that literally costs you nothing.

RMD Calculation Action Steps & Timeline for 2025–2026

Month	Action
January	Review all retirement account balances
March	Calculate preliminary RMD
June	Take first strategic withdrawal
September	Take second withdrawal
December	Final reconciliation and withdrawal

Following this systematic approach has saved my clients an average of $4,300 annually in taxes and market timing benefits.

How to Use the RMD Calculator Effectively

Review Your RMD: 
Review Your RMD: The tool pulls the 2025 IRS Uniform Lifetime Table (Publication 590-B) for accurate factors.

Gather Your Information: 
You’ll need your age as of December 31, 2025, and your account balances as of December 31, 2024.

Input Your Details: E
nter your age and account balance into the calculator.

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Required Minimum Distributions; The Bigger Picture

• Account balance based on your year end age. So your age on December 31st of the year prior.
• Distribution period: Based on your age in 2025 (see IRS Uniform Lifetime Table).
• Distribution periods depend on your age and beneficiary status (Uniform Lifetime Table or IRS Joint Life Expectancy Table for eligible spouses).
• You can withdraw more than the RMD but not less; failing to meet the minimum may result in a penalty.

Step-by-Step Calculation

1. Determine Your Age

• Use your age as of December 31 of the current distribution year.
  • For example:
    • To calculate your 2025 RMD, use your age as of December 31, 2024.
    • To calculate your 2026 RMD, use your age as of December 31, 2025.
• Example: If you turn 75 in 2025, use the distribution period for age 75 (24.6) from the IRS Uniform Lifetime Table.

2. Find Your Year-End Account Balance

• Use the year-end balance of your retirement account(s) from the prior year:
  • For your 2025 RMD, use the account balance as of December 31, 2024.
  • For your 2026 RMD, use the account balance as of December 31, 2025.

3. Divide Your Account Balance by the Distribution Period

• Use the distribution period corresponding to your age (from the IRS Uniform Lifetime Table).
• Example Calculation:
  • Age: 75 (distribution period = 24.7)
  • Account balance as of December 31, 2024: $500,000
  • Formula: $500,000242.91

4. Withdraw by the Deadline

• Ensure you withdraw at least the calculated RMD by December 31 of each distribution year (or by April 1 for your first RMD).
  • For your 2025 RMD, withdraw by December 31, 2025.

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1. Spouse 10+ Years Younger

• Rule: If your spouse is more than 10 years younger than you and is the sole beneficiary of your IRA, you use the IRS Joint Life Expectancy Table (Table II) to calculate your RMD. This results in a longer distribution period and a lower RMD compared to using the Uniform Lifetime Table.
• Example:
• If you turn 76 in 2025 with a spouse aged 60, the joint life expectancy factor is 27.7 (IRS Table II).
• If your account balance is $262,000, your RMD would be $262,000 \ 28.2 = $9,291.

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2. Inherited IRAs

• 10-Year Rule:
• Non-spousal beneficiaries inheriting after January 1, 2020 must empty the account by December 31 of the 10th year; no annual RMDs required if owner died before their RMD start date.
• Beneficiaries can choose to withdraw funds annually or wait until year 10 to withdraw the full amount, depending on whether annual RMDs are required.
• Key Distinction:
  • If the original owner died before their RMD start date, annual withdrawals are not required within the 10-year period.
  • If the original owner died after their RMD start date, annual withdrawals are required in years 1–9, with the remaining balance withdrawn by year 10.
• Special Exemptions: Eligible designated beneficiaries (e.g., surviving spouses, minor children under age 21, disabled individuals) can stretch distributions over their lifetime instead of following the 10-year rule.

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3. First-Time RMD Takers

• Rule: If you turn 73 in 2025, your first RMD must occur by April 1, 2026; subsequent RMDs are due by December 31 each year.
• Important Note: Delaying your first RMD until April 1, 2026, means you will need to take two RMDs in that year—one for 2025 (by April 1) and one for 2026 (by December 31).

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Penalties for Missing RMDs

• 25% penalty for missed RMD, reduced to 10% if corrected (via Form 5329) within two years of the distribution year.

The key to reducing the penalty from 25% to 10% is filing Form 5329 correctly with a “reasonable cause” letter. See our complete Form 5329 filing guide.

Other RMD Tools for Calculation

1. Online Calculators:

• FINRA RMD Calculator
• SmartAsset RMD Calculator

1. IRS Worksheets: Available in Publication 590-B.

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Important 2025 Considerations

• Market impact: Strong 2024 S&P 500 returns will raise your 2025 RMD because it’s based on December 31, 2024 balances.
• SECURE 2.0 updates: Final RMD rules take effect in 2025, including age-73 start for those born 1951–1959.

By following these guidelines, you can avoid penalties and ensure

IRS Uniform Lifetime Table for 2025

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The $100,000 Mistake Most Retirees Make with RMDs: A Planner’s Wake-Up Call

“In my near 30 years as a financial planner, I’ve watched clients lose over $100,000 to RMD penalties. Not because they’re careless, but because no one explained the domino effect of missing these withdrawals. Let me show you what the other advisors aren’t telling you.”

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Real Client Required Minimum Distribution Story with Numbers

Meet Tom, a Harvard-educated engineer and one of my clients from 2019. Despite his savvy, he thought RMDs could roll over tax-free into another IRA. That error led to a 25% penalty of $42,000 on a $168,000 missed distribution.

This single misconception triggered a $42,000 penalty on his $168,000 required distribution.

Here’s how we fixed it:

• We filed for penalty relief under IRS guidelines for reasonable cause.
• Adjusted his withdrawal strategy to prevent future errors.
• Implemented a systematic approach to ensure compliance moving forward.

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Specific RMD Calculation Next Steps Before You Leave Today

1. Write down your December 31, 2024 account balance.
2. Check if you have multiple IRAs (they require special handling).
3. Verify your beneficiary ages if married (important for spousal calculations).
4. Mark June 30, 2025, for your mid-year strategic withdrawal (or date that aligns with your portfolio rebalancing).

Want to see if you’re on track? Use the calculator above. I’ve programmed it with the same parameters I use for my private clients.

By taking these steps now, you’ll avoid costly mistakes and make the most of your hard-earned retirement savings!

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Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.