If you have a traditional IRA, 401(k), or most other tax-deferred retirement accounts, you are subject to Required Minimum Distributions, annual withdrawals the IRS requires once you reach a certain age. The government allowed that money to grow tax-deferred for decades, and RMDs are how they collect on that arrangement. December 31st is the deadline for most distributions, which makes fall the time to review how yours fits into your financial picture for the year.
What Is an RMD?
A Required Minimum Distribution is the amount the IRS requires you to withdraw from certain retirement accounts each year. To calculate yours, divide your account balance as of December 31 of the prior year by the distribution period that corresponds to your age in the IRS Uniform Lifetime Table. At age 74, the distribution period is 25.5, so a $200,000 IRA balance on December 31, 2025 produces a 2026 RMD of roughly $7,843. The accounts subject to RMDs include traditional IRAs, SEP-IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and most other employer-sponsored retirement plans. Roth IRAs are the exception, as they carry no RMD requirement for the original account owner during their lifetime.
When Do RMDs Start?
Under the SECURE 2.0 Act, your RMD start age depends on your birth year. Those born between 1951 and 1959 begin RMDs at age 73, and those born in 1960 or later begin at age 75. If you turn 73 in 2026 and are taking your first RMD, you have until April 1, 2027 to take that distribution — but delaying means taking two distributions in the same calendar year, since your second RMD is still due by December 31, 2027. Two distributions in one year can push more income into a higher bracket than you'd prefer, so the delay isn't always the right call.
What Happens If You Miss the Deadline?
The IRS imposes a 25% excise tax on any amount that should have been distributed but wasn't. That penalty drops to 10% if you correct the missed RMD within two years. Missing an RMD is avoidable with advance planning and expensive to fix after the fact, so it's worth building the deadline into your year-end calendar well before December.
The Tax Side of RMDs
RMDs are taxed as ordinary income in the year you take them, and they stack on top of other income sources (Social Security, a pension, investment income) which can push you into a higher federal bracket. A larger-than-expected RMD can also affect how much of your Social Security is taxable and trigger IRMAA surcharges, the income-related adjustments to Medicare Part B and Part D premiums. IRMAA thresholds are based on income from two years prior, so a large RMD in 2026 could affect your Medicare costs in 2028. Because of these downstream effects, RMDs are best addressed as part of a broader income strategy rather than treated as a standalone calculation.
Available Strategies
Qualified Charitable Distributions
If you are 70½ or older and give to charity, a Qualified Charitable Distribution is one of the most tax-efficient options available. A QCD allows you to transfer up to $111,000 directly from your IRA to a qualified charity in 2026, and the amount counts toward your RMD for the year while being excluded from your taxable income entirely. That exclusion reduces your Adjusted Gross Income directly, which can lower the portion of Social Security subject to tax, reduce IRMAA exposure, and keep you out of a higher bracket — benefits that a standard charitable deduction, particularly for those who take the standard deduction, typically does not deliver.
For Montana retirees who donate regularly to a church, a local nonprofit, or other qualified organizations and have been writing personal checks, switching to a QCD from your IRA almost always produces a better tax outcome. The charity receives the same amount, and the tax benefit is greater. Two things to keep in mind: the distribution must go directly from your IRA custodian to the charity, you cannot withdraw the funds and donate them yourself and QCDs cannot go to donor-advised funds.
Roth Conversions Before RMDs Begin
If you are in your 60s and not yet subject to RMDs, converting a portion of your traditional IRA to a Roth IRA each year reduces the balance that will eventually be subject to required distributions. Roth conversions are taxable in the year of conversion, but the goal is to pay tax at today's rates on a manageable portion of your balance rather than facing larger forced distributions at potentially higher rates later. This strategy produces the best results when spread over several years and coordinated with your full tax picture.
Timing Distributions Within the Year
You have flexibility for when you take your RMD throughout the year. Some retirees take distributions early to get them done; others wait to allow the account to continue growing tax-deferred. If you plan to use a QCD, execute it before taking any other IRA distributions in the year. Once you take a cash distribution from your IRA, it cannot be reclassified as a QCD after the fact.
Account Consolidation
If you have multiple IRAs, you can calculate the RMD for each account separately and then take the total amount from one or more accounts in any combination you choose. For 401(k)s and other employer plans, the rules differ and each account requires its own separate distribution.
Inherited IRAs in 2026
If you inherited an IRA from someone who was not your spouse, the rules have changed significantly in recent years. Most non-spouse beneficiaries are now required to withdraw the entire inherited IRA balance within 10 years under the SECURE Act. Starting in 2025, if the original owner had already begun taking RMDs before their death, beneficiaries must also take annual distributions within that 10-year window rather than waiting until year 10 to withdraw everything. Inherited IRAs are one of the more complicated areas of retirement planning right now, and the rules are specific enough that a conversation with a qualified advisor is the right first step before making any decisions.
Montana Taxes
Montana taxes RMD income as ordinary income at the state level, with a top rate of 5.9% for most retirees. The state does not offer a separate exemption for retirement income, so RMDs layer on top of any other income reported on your state return. If you use a QCD strategy to reduce your federal AGI, that same reduction flows through to your Montana return, making QCDs particularly effective for Montana retirees managing both federal and state tax exposure.
December 31 Deadline
Most RMDs must be taken by December 31. That deadline can sneak up in the fourth quarter when schedules fill up, and financial tasks get pushed back. Starting the conversation in September or October gives you time to evaluate the strategies above, coordinate with your tax advisor, and make sure your distribution is processed before the year ends. If you are not sure what your RMD is for 2026, have questions about whether a QCD fits your situation, or want to talk through how your distributions fit into your retirement income plan, give our team a call at (406) 657-9621.
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Frequently Asked Questions
What age do RMDs start in 2026?
Your starting age depends on your birth year. Those born between 1951 and 1959 begin RMDs at age 73, and those born in 1960 or later begin at age 75 under the SECURE 2.0 Act. These rules apply to traditional IRAs, 401(k)s, and most other tax-deferred retirement accounts.
How do I calculate my RMD for 2026?
Divide your account balance as of December 31, 2025 by the distribution period for your age in the IRS Uniform Lifetime Table. At age 74 the divisor is 25.5, and at age 75 it is 24.6. If your sole beneficiary is a spouse more than 10 years younger than you, a different table applies that produces a lower RMD.
What is a Qualified Charitable Distribution and how does it reduce taxes?
A QCD is a direct transfer of up to $111,000 from your IRA to a qualified charity in 2026. It counts toward your RMD for the year and is excluded from your taxable income, reducing your Adjusted Gross Income rather than simply providing a deduction. For retirees who already give to charity and take the standard deduction, a QCD typically delivers a larger tax benefit than donating cash. The distribution must go directly from your IRA custodian to the charity, and QCDs cannot be directed to donor-advised funds.
What happens if I miss my RMD deadline?
The IRS imposes a 25% excise tax on the amount that should have been distributed but wasn't, dropping to 10% if corrected within two years. The standard deadline for most RMDs is December 31.
This information is not intended as specific tax or legal advice. Please consult a qualified tax or legal professional regarding your individual situation.