Brandon Renfro, CFP®, RICP, EA
6 min read
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I have $1 million in my IRA. Once I reach 73 years of age what are the withdrawal requirements? I retired five years ago with no income other than Social Security. What tax bracket will I be in when I begin withdrawing 4% of my IRA?
– Clifford
Once you reach age 73, you’ll need to take required minimum distributions (RMDs) from your traditional IRA each year. These withdrawals are subject to income tax and calculated using an IRS formula based on your age and account balance. We'll walk through how RMDs work and then estimate the tax bracket you may fall into once you begin withdrawing 4% annually from your IRA.
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Once you turn 73 (75 for people born in 1960 or later), you’re required to begin taking minimum withdrawals from tax-deferred retirement accounts like traditional IRAs and 401(k)s. These RMDs are taxed as ordinary income. The rule exists because Congress designed tax-deferred accounts to postpone taxes-not eliminate them entirely-so RMDs prevent indefinite tax deferral.
RMDs are designed to distribute your retirement account balance gradually over your expected lifetime. Each year, you calculate your RMD by dividing your account balance-measured as of December 31 of the previous year-by a distribution period or life expectancy factor from an IRS table. Most individuals use the Uniform Lifetime Table, but if your sole beneficiary is a spouse who is more than 10 years younger, you'll use the Joint Life and Last Survivor Table, which typically results in smaller required distributions.
According to the IRS Uniform Lifetime Table, the distribution period for a 73-year-old is 26.5 years. So, if you were to turn 73 this year and your IRA had $1 million on Dec. 31, 2024, your RMD in 2025 would be $37,736 ($1,000,000/26.5). For next year, you would divide the balance of your IRA as of December 31, 2025, by the distribution period that corresponds with a 74-year-old, since that's how old you'd be.
You mentioned that you plan to follow the 4% rule, so at least initially your planned distribution would exceed the RMD and you'd satisfy the requirement. (And if you need help planning for RMDs or managing your taxes in retirement, work with a financial advisor.)
While we can't pinpoint your exact tax bracket without more details, we can get a reasonably close estimate. Walking through the numbers will give you a good sense of where you may land.
