Your RMD Is Not the Problem. What Your State Does With It Is.

At some age between 72 and 75, depending on when you were born, the government stops letting you decide when to take money out of your retirement account.

It hands you a number and a deadline.

Most articles about required minimum distributions stop there, as though the number were the difficulty. It is not. The number is arithmetic — a balance divided by a factor from a table — and it is exactly the same whether you live in Miami or Minneapolis.

What is not the same is what happens to it next. On the same forced $60,976 distribution, nineteen states charge nothing at all and Oregon charges $4,762. That gap is not something the IRS decides, it is not something you can appeal, and it is entirely invisible on the federal form that told you the amount.

A note before you start. This is general education, not tax advice. The distribution figures here come from this site's RMD engine, which implements the IRS Uniform Lifetime Table (Publication 590-B, Appendix B, Table III) and the SECURE 2.0 starting ages; the state figures come from its fifty-state income-tax dataset, computed for a single filer aged 75 with $30,000 of Social Security alongside the distribution. State legislatures revise retirement taxation regularly and several states are mid-phase-down, so confirm a figure that is doing real work in your decision. Your own account may follow a different table entirely — see section 4.

1. Where the number comes from

Prior year's ending balance, divided by a factor. That is the whole calculation.

The factor comes from the IRS Uniform Lifetime Table and depends only on the age you reach during the distribution year. It gets smaller every year, which means the fraction of your balance you must take gets larger every year.

Read the last column as a trend rather than a set of facts. It holds the balance constant at a million dollars, which no real account does — a portfolio that grows produces a distribution rising faster than the percentage alone suggests, and one being drawn down produces one that rises more slowly.

But the direction is fixed. The table is built to empty the account over a life expectancy, so the required share necessarily accelerates. Someone who plans around the 3.77% they meet at 73 and never revisits it is planning around the smallest number they will ever see.

2. When yours starts

SECURE 2.0 replaced a single starting age with three, keyed to birth year.

• Born 1950 or earlier — started at 72.
• Born 1951 through 1959 — starts at 73.
• Born 1960 or later — starts at 75.

The 1959 / 1960 boundary is worth noticing if you are near it, because two people born fourteen months apart can have starting ages two years apart. Two extra years before the first forced distribution is two extra years of the conversion window described in section 8, and that is a large planning difference for a small difference in birthday.

One timing quirk applies to the first year only. The first distribution may be deferred into the following April, which sounds like a favour and frequently is not: deferring means two distributions land in the same tax year, stacking one on top of the other in your brackets and, in a state with graduated rates, potentially in a higher one. The deferral is a cash-flow tool, not a tax-saving one, and taking the first distribution in its own year is the ordinary choice for a reason.

3. What your state does with it

Here is the part almost nothing else covers. The same forced $60,976, in the same year, at the same age.

Nineteen at zero is the headline, and it is a larger number than most people expect. It includes the states with no income tax at all, but it also includes several that do tax wages and simply exempt retirement income — which is why "does my state have an income tax" is the wrong question to ask about a distribution.

The spread is roughly $4,800 a year, indefinitely. Over a twenty-year retirement, on a balance that grows, that is a six-figure difference produced by nothing except an address.

4. Whose table applies to you

Almost everyone uses the Uniform Lifetime Table. There is one significant exception and one large category this article does not cover.

The exception: a spouse more than ten years younger, named as sole beneficiary. A different table applies, with longer factors, and the required distribution is smaller — sometimes substantially. If that describes you and you have been using the ordinary table, you have been taking out more than required, which is not a penalty but is a tax cost you did not have to pay.

The category not covered here: inherited accounts. An IRA you inherited follows an entirely different regime, dominated by the ten-year rule rather than by a life-expectancy factor. That is a separate article and the rules genuinely do not overlap.

And two account types have no lifetime requirement at all. A Roth IRA never requires a distribution during the original owner's lifetime, and a designated Roth account inside a 401(k) no longer does either. This is the single largest reason a Roth conversion changes the shape of a retirement rather than just its tax bill — it removes money from the calculation permanently rather than moving when it is taxed.

5. The mistake that costs the most

IRAs may be aggregated. 401(k)s may not.

Compute the requirement for each traditional IRA you own, add them together, and you may satisfy the whole total from any single one of them. That flexibility is real and useful — you can leave an illiquid account alone and take everything from a cash-heavy one.

A 401(k) does not work that way. Each plan must distribute its own amount. Someone with two old employer plans and an IRA who takes one large withdrawal from the IRA has satisfied the IRA requirement and missed both plan requirements entirely.

That is a 25% penalty on each shortfall. It is the commonest expensive RMD mistake and it is made by careful people, because the aggregation rule they learned for IRAs feels like it should generalise. It does not.

6. What happens if you miss it

The penalty is 25% of the shortfall — the amount you should have taken and did not.

On the $60,976 distribution above, missing it entirely is a $15,244 penalty. On the $101,626 that a $2.5 million balance forces, it is $25,407.

Corrected within the statutory window, the penalty falls to 10% — $6,098 and $10,163 respectively. That is a meaningful reduction and it is the reason a missed distribution should be dealt with immediately rather than at the next filing.

Two things worth understanding about the penalty. It is charged on the shortfall, not on the whole distribution, so a partial withdrawal reduces it proportionally. And it is separate from the ordinary income tax, which you still owe on the money once you take it — the penalty is not a substitute for the tax, it is an addition to it.

SECURE 2.0 cut this from 50%, which is worth knowing only because a great deal of published material still quotes the old figure. If you find yourself reading that a missed distribution costs half the shortfall, you are reading something written before the change.

7. Why the state question compounds

A single year's $4,762 gap sounds manageable. Three things make it worse than it looks.

The distribution grows. Section 1's table shows the required percentage rising from 3.77% to over 11%. A state that takes 7.8% of a $60,976 distribution takes the same share of a much larger one later.

It stacks on everything else. The distribution is not your only income. It lands on top of Social Security, any pension, any part-time work, any interest — which in a graduated state means it is taxed at your top rate rather than your average one. The figures above already model that, with $30,000 of Social Security alongside, which is why they are higher than a rate applied to the distribution alone would suggest.

And it is not optional. Every other income decision in retirement has a lever attached. You can defer a sale, skip a withdrawal, take less this year and more next. The required distribution is the one number you cannot decline, which makes the state that taxes it the one decision that matters most and is hardest to reverse.

8. The window before it starts

Everything useful happens before the first distribution, and the window is bigger than most people use.

If you retire at 62 and distributions begin at 75, you have thirteen years in which your income is whatever you choose to make it. In most of those years there is no requirement, often no Social Security yet, and often no wages — which means unusually low ordinary income and unusually low marginal rates.

That is the conversion window, and its logic is simple. Money converted to Roth in those years is taxed once, at a low rate, and then never appears in an RMD calculation again — because a Roth has no lifetime requirement. Money left alone is taxed later, at whatever rate applies then, on a balance that has grown.

One caution specific to the state question. This site's state engine shows that in the states that fully exempt retirement income, converting before Social Security starts and converting after it starts produce identical state bills — Ohio charges $934 on a $60,000 conversion either way, California $1,793, Oregon $4,676. The conversion window's value in those states is a federal effect, driven by provisional income and bracket space, not a state one.

Which is a useful thing to know before you build a plan around it. The window is real, it is worth using, and in many states the reason it is worth using has nothing to do with the state.

9. Charitable transfers, briefly

If you give to charity anyway, a qualified charitable distribution is the most efficient way to satisfy a requirement.

The money goes directly from the IRA to the charity, counts toward the required amount, and never appears in your income at all. Because it never enters your income, it does not raise your state taxable income either — which in a state charging 7.8% on distributions is a benefit on top of the federal one.

The conditions are specific — an age threshold, an annual dollar cap, a direct transfer rather than a reimbursement, and eligible recipients only — and they are the sort of conditions that get updated, so check the current ones rather than a summary. The structural point is the part worth carrying: this is the only common way to satisfy a distribution requirement without the money passing through your tax return.

10. What actually decides your exposure

Four things, in order of how much they matter and how early you have to act.

Your balance at 72. Everything downstream is a percentage of it. This is decided by decades of saving and is the least changeable input by the time the question becomes urgent.

How much of it is Roth. Roth money is outside the calculation entirely. This is the only lever with a permanent effect, and it can only be pulled before the distributions begin.

Where you live. A $0-to-$4,762 annual difference, decided by an address, compounding for as long as you live. Changeable, but expensively and not casually.

Which accounts you hold it in. Not a tax difference, but the aggregation trap in section 5 is real and consolidating old 401(k)s into an IRA removes it entirely.

None of these can be pulled in the year the distribution arrives. By then the balance is set, the address is set, and the only remaining decision is which account to take it from. That is why the useful version of this article is the one you read at 65 rather than at 75.

11. Three situations that need a professional

A spouse more than ten years younger. A different table, a smaller requirement, and a beneficiary designation that has to be right for it to apply.

Multiple employer plans plus IRAs. The aggregation rules differ by account type and the penalty for getting it wrong is 25% per plan.

A state move planned near the starting age. Part-year residency, sourcing rules, and the question of which state taxes a distribution taken in a transition year are all specific enough that a rule of thumb will not settle them.

In each case the cost of an hour of advice is small next to a 25% penalty or a permanent annual state bill, and the decision is one you make once.

12. One thing to check this year, whatever your age

Your beneficiary designations.

They have nothing to do with your own required distributions and everything to do with what happens to the account afterwards — and unlike almost every other decision in this article, an out-of-date designation is both consequential and free to fix.

It matters more since the ten-year rule. A beneficiary who would once have drawn the account down over a lifetime now generally has ten years, which means the choice of beneficiary determines a tax outcome far more sharply than it used to. A named individual, a named trust and no named beneficiary at all produce materially different results.

And it overrides your will. A retirement account passes by designation, not by testament. A form completed at a job you left in 1998 governs regardless of anything written since.

Check it, confirm it is who you think, and confirm the account is titled correctly. It takes ten minutes and it is the only item in this article with no downside.

Frequently asked questions

When do my required distributions start? It depends on your birth year. Born 1950 or earlier, they started at 72. Born 1951 through 1959, they start at 73. Born 1960 or later, at 75. The boundary between 1959 and 1960 is a two-year difference in starting age for a one-year difference in birth year.

How is the amount calculated? Your account balance at the end of the prior year, divided by a factor from the IRS Uniform Lifetime Table for the age you reach during the distribution year. At 75 the factor is 24.6, so the required amount is 4.07% of the balance.

Does the percentage change as I get older? Yes, and it accelerates. It is 3.77% at 73, 4.07% at 75, 4.95% at 80, 6.25% at 85, 8.20% at 90 and 11.24% at 95. The table is designed to empty the account over a life expectancy.

What happens if I miss one? The penalty is 25% of the shortfall, reduced to 10% if corrected within the statutory window. On a $60,976 requirement, that is $15,244 or $6,098. You still owe the ordinary income tax on the money as well — the penalty is in addition, not instead.

Can I take my whole total from one account? For IRAs, yes — compute each, then satisfy the total from any one. For 401(k)s, no. Each plan must distribute its own amount. Mixing the two rules is the commonest expensive mistake in this area.

Do Roth accounts have required distributions? Not during the original owner's lifetime, for either a Roth IRA or a designated Roth account inside a 401(k). This is the main structural reason a conversion changes the shape of a retirement rather than just the timing of a tax bill.

Which states tax my distribution? Nineteen charge nothing on a $60,976 distribution alongside $30,000 of Social Security. At the other end, Oregon charges $4,762, Minnesota $4,663 and Vermont $4,399. Several states that tax wages exempt retirement income entirely, so the presence of an income tax does not answer the question.

Can I stop the distribution if I do not need the money? No. You can choose which account it comes from, you can send it to charity through a qualified charitable distribution, and you can reinvest it in a taxable account after taking it. You cannot decline it.

Does a large distribution affect my Medicare premium? Yes, with a two-year lag. The IRMAA surcharge is assessed on income from two years earlier, so a large distribution — or a large conversion — raises a premium two years later, when the year that caused it has already closed.

Should I convert to Roth before distributions start? It depends on your rate now versus later, which is the same comparison every Roth decision reduces to. What is specific here is that a conversion permanently removes money from the required-distribution calculation, which a mere withdrawal does not.

What to do next

Work out two numbers before anything else: what your first required distribution will be, and what your state will charge on it. Those two facts tell you whether this is a scheduling question or a relocation question.

• RMD calculator — your required amount, the factor behind it, and the penalty if you miss it
• Retirement state tax calculator — what your state charges on a distribution, cited per state
• The Retirement Withdrawal Order Playbook — which account to draw from first, and why the order matters more than the amounts
• The Relocation Tax Playbook — if the $4,762 spread above made the address look like a decision