Once you reach age 73, RMDs become mandatory by the end of that year for most tax-deferred retirement accounts, including traditional IRAs. However, workplace retirement plans such as 401(k)s may allow you to wait until the later of age 73 or the date you retire, depending on the plan, so check with your employer. Another exception that applies to all plans is that your first RMD may be deferred until April 1 of the year following age 73. However, that would require you to take two distributions by the end of the year following age 73.
You should also be aware that under SECURE 2.0, the RMD starting age increases to 75 beginning January 1, 2033 if you were born after December 31, 1959.
While you cannot avoid taxes, you can potentially manage them strategically. Along with planning for any taxes on your withdrawals, it is also important to focus on minimizing possible penalties. If you fail to take your full RMD on time, the amount not withdrawn is taxed at 50%.
You should also note that each tax-deferred retirement account has its own RMD requirement. So, if you have multiple IRAs, you can calculate the total RMD and withdraw the full amount from one or more IRA accounts. However, this aggregation rule does not apply to employer plans; each 401(k) must satisfy its own RMD separately.
The required amount is based on IRS life expectancy tables and your account balances as of December 31 of the previous year. Once calculated, you may then look to managing the tax impact of those withdrawals.