Required Minimum Distributions (RMDs): Rules for Self-Directed IRAs
If you have a Traditional IRA, SEP IRA, or SIMPLE IRA, the IRS will eventually require you to start pulling money out — whether you need it or not. These mandatory annual withdrawals are called Required Minimum Distributions (RMDs).
For self-directed IRA investors who hold real estate, promissory notes, or other alternative assets, RMD planning carries an extra layer of complexity.
What Are Required Minimum Distributions?
An RMD is the minimum amount you must withdraw from your tax-deferred retirement account each year once you reach a certain age.
RMDs apply to: Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k), 403(b), and 457(b) plans, and Inherited IRAs (with separate rules).
RMDs do NOT apply to Roth IRAs during the account owner’s lifetime.
When Do RMDs Begin? The Updated Age Rules
| Your Birth Year | RMD Starting Age | Law That Applies |
|---|---|---|
| 1950 or earlier | 70½ | Pre-SECURE Act rules |
| 1951 – 1959 | 73 | SECURE 2.0 Act (2022) |
| 1960 or later | 75 | SECURE 2.0 Act (effective 2033) |
Key dates to remember:
- If you turned 73 in 2024, 2025, or 2026, you are already in RMD territory.
- If you were born in 1960 or later, your first RMD is not required until the year you turn 75.
- Your first RMD can be delayed until April 1 of the year following the year you reach your RMD age. However, delaying means you will have to take two RMDs in that second year.
How to Calculate Your RMD
RMD = Account Balance (as of December 31 of the prior year) ÷ Life Expectancy Factor
The life expectancy factor comes from the IRS Uniform Lifetime Table (Table III in IRS Publication 590-B).
Sample Uniform Lifetime Table Factors
| Age | Life Expectancy Factor | Approximate RMD % of Balance |
|---|---|---|
| 73 | 26.5 | 3.77% |
| 74 | 25.5 | 3.92% |
| 75 | 24.6 | 4.07% |
| 76 | 23.7 | 4.22% |
| 77 | 22.9 | 4.37% |
| 78 | 22.0 | 4.55% |
| 79 | 21.1 | 4.74% |
| 80 | 20.2 | 4.95% |
| 85 | 16.0 | 6.25% |
| 90 | 12.2 | 8.20% |
Example: Robert is 76 years old and his self-directed IRA had a balance of $500,000 on December 31, 2025. His 2026 RMD is $500,000 ÷ 23.7 = $21,097.05.
Special spousal rule: If your sole beneficiary is a spouse who is more than 10 years younger, you use the Joint Life and Last Survivor Expectancy Table instead.
RMDs and Self-Directed IRAs: Handling Illiquid Assets
If your IRA holds real estate or other illiquid assets, you still owe the RMD. The IRS does not grant exceptions based on asset liquidity.
Strategies for Meeting RMDs With Alternative Assets
1. Maintain a cash reserve inside the IRA. Keep enough cash for at least one to two years of anticipated RMDs.
2. Take an in-kind distribution. Distribute the actual asset (or a fractional interest) rather than cash.
3. Sell an asset to generate liquidity. Plan well ahead of the December 31 deadline.
4. Use other IRA accounts. If you have multiple Traditional IRAs, you can take the entire distribution from a liquid account while leaving your self-directed IRA assets untouched.
The Roth IRA Exception
Roth IRAs are NOT subject to RMDs during the account owner’s lifetime. This is one of the most powerful advantages of the Roth structure.
Note for beneficiaries: Inherited Roth IRAs are subject to distribution rules after the owner’s death, but the distributions are generally tax-free.
Inherited IRA RMD Rules: The 10-Year Rule
For Deaths After 2019 (SECURE Act and SECURE 2.0)
Most non-spouse beneficiaries must fully distribute the inherited IRA within 10 years of the original owner’s death.
Important clarification from IRS guidance (2024): If the original owner had already begun taking RMDs before death, the beneficiary must take annual distributions during the 10-year window.
Eligible designated beneficiaries who can still use the stretch method:
- Surviving spouses
- Minor children of the deceased (until age of majority)
- Individuals who are disabled or chronically ill
- Beneficiaries not more than 10 years younger than the deceased
Penalties for Missed RMDs
| Situation | Penalty |
|---|---|
| Missed RMD (not corrected) | 25% of the shortfall amount |
| Missed RMD, corrected within the IRS correction window | 10% of the shortfall amount |
| Missed RMD, corrected with reasonable cause and IRS approval | Potentially waived entirely |
Strategies to Reduce the Tax Impact of RMDs
1. Roth Conversions Before RMDs Begin
Convert Traditional IRA funds to a Roth in lower-income years. Every dollar moved to a Roth is no longer subject to RMDs.
2. Qualified Charitable Distributions (QCDs)
If you are 70½ or older, you can direct up to $105,000 per year (2026 limit) from your IRA directly to a qualified charity. A QCD counts toward your RMD but is NOT included in your taxable income.
3. Strategic Timing of Your First RMD
Delaying to April 1 of the following year may make sense if you had unusually high income in the year you reached RMD age.
4. Consider Your Overall Tax Picture
Work with a tax professional to model scenarios.
5. Use RMD Funds to Fund a Roth IRA (Indirectly)
You cannot redirect an RMD into a Roth IRA. However, if you have earned income, you can take your RMD and then make a separate Roth IRA contribution.
6. Plan for Inherited IRA Distributions
Consider spreading withdrawals across the full 10 years rather than waiting until year 10.
Frequently Asked Questions
At what age do I have to start taking RMDs?
Born 1951-1959: age 73. Born 1960 or later: age 75.
Do Roth IRAs have RMDs?
No. Not during the account owner’s lifetime.
How do I calculate my RMD?
Divide your December 31 balance by your IRS Uniform Lifetime Table factor.
What happens if I miss my RMD deadline?
25% penalty; 10% if corrected in time; potentially waived with reasonable cause.
Can I take my RMD from any IRA account?
Yes, if you have multiple Traditional IRAs.
How do I handle RMDs when my IRA holds real estate?
Maintain cash reserves, take in-kind distributions, sell an asset, or aggregate across multiple IRAs.
What is the 10-year rule for inherited IRAs?
Most non-spouse beneficiaries must distribute the entire account within 10 years of the owner’s death.
Can I do a Qualified Charitable Distribution to satisfy my RMD?
Yes. Up to $105,000 per year (2026), excluded from taxable income.