Required minimum distribution (RMD) calculator for freelancers

The IRS makes you withdraw a minimum each year after a certain age. This calculator tells you how much.

Once you reach the required beginning age, the IRS mandates that you withdraw a minimum amount each year from your traditional retirement accounts. That minimum grows every year as the distribution period shrinks, regardless of how your balance performs.

Enter your current account balance, your age, and your other income to estimate your RMD and see how much it adds to your taxable income.

What an RMD is and why it exists

A required minimum distribution is the smallest amount the IRS requires you to withdraw from a traditional IRA, SEP IRA, or traditional Solo 401(k) each year once you reach the required beginning age. The rule exists because these accounts give you a tax deduction today on the condition that you eventually pay tax on the money. The government does not want you deferring that tax indefinitely.

The calculation is straightforward: your account balance as of December 31 of the prior year, divided by a distribution period from an IRS table. The tables assume you will live longer than the period suggests, which means you are required to withdraw more each year as you get older — even if your balance has shrunk.

When do RMDs start?

Under the SECURE 2.0 Act, the starting age depends on when you were born:

• Born before July 1, 1951: RMDs start at age 72.
• Born 1951–1959: RMDs start at age 73.
• Born 1960 or later: RMDs start at age 75.

The first RMD is due by April 1 of the year following the year you turn the required age. This is called the "required beginning date." Subsequent RMDs are due by December 31 of each year. Taking your first RMD in April and your second in December of the same year means you have two distributions in one tax year — a trap that catches a surprising number of people and pushes them into a higher bracket than necessary.

How the IRS table works

The Uniform Lifetime Table gives a distribution period based on your age. At age 73 the period is 26.5 years; at age 80 it is 20.2 years; at age 90 it is 11.2 years. As you age the divisor shrinks, so the required withdrawal percentage rises each year even if your account balance stays flat.

If your sole spouse is more than 10 years younger than you, you may use the Joint Life and Remainder Expectancy Table instead, which gives a longer period and therefore a smaller RMD. This is the only common situation where the table choice matters.

What happens if you do not take the full RMD

The penalty for failing to take the full RMD is 25% of the amount that should have been distributed. This can be reduced to 10% if you file Form 5329 and correct the shortfall in a timely manner. The penalty is steep enough that most people take at least the required amount, even when they do not need the money.

How RMDs affect your tax situation

RMDs are taxed as ordinary income. They sit on top of your other income — Social Security, pension, rental income, capital gains — and can push you into a higher marginal bracket. They can also make a larger portion of your Social Security benefits taxable and push you into a higher Medicare Income-Related Monthly Adjustment Amount (IRMAA) bracket.

For freelancers with a Solo 401(k) or SEP IRA, RMDs can be especially disruptive because freelance income is already variable. A year that is already high-income from business profits becomes higher still when the RMD is added, potentially creating a bracket jump that would not exist in either scenario alone.

Strategies to manage RMD impact

Roth conversions before RMDs begin. Converting traditional IRA or Solo 401(k) balances to Roth before the RMD age reduces the balance that will generate future required withdrawals. This is the single most powerful RMD management strategy for self-employed people who have conversion room in a low-income year.

Qualified charitable distributions. If you are over 70½, you can direct up to $100,000 per year of your RMD directly to a qualifying charity from your IRA. The distribution satisfies your RMD but is not counted as taxable income. This is unavailable from 401(k) plans unless the plan specifically permits it.

Taking the first RMD in December instead of April. If you are eligible for the April 1 delay, choosing to take both the first and second RMD in December of the same year — when allowed by your plan — avoids the two-distributions-in-one-year problem. Not all plans permit this, so check with your provider.