9 RMD Myths Retirees Get Wrong
Required minimum distributions are one of the biggest sources of confusion I see in retirement planning, and honestly, it makes sense rules change, accounts differ, and one wrong assumption can cost you real money. So I’m breaking down the nine biggest RMD myths I hear all the time, and I’ll walk you through what’s actually true so you can make smart decisions with confidence.
1. “I have to take my RMD all at once.”
No, you don’t. You only have to withdraw the full required amount by December 31st. If my RMD is $24,000, I can take $2,000 per month, quarterly distributions, or one end-of-year withdrawal. I usually spread it out because it makes tax planning easier.
2. “If I’m still working, I can delay all my RMDs.”
Only partially true. I can delay RMDs from my current employer’s plan if the plan allows it and I own less than 5% of the company. But I still must take RMDs from old 401(k)s and all IRAs, no matter how much I’m working.
3. “I can combine all my accounts and take one RMD.”
Not exactly. IRA RMDs can be aggregated, meaning I can take the total from one IRA if I want. But 401(k) RMDs must be taken separately from each employer plan. There is no mixing and matching between account types.
4. “Roth IRAs have RMDs.”
They don’t. Roth IRAs have no lifetime RMDs. And starting in 2024, Roth 401(k)s are no longer subject to RMDs either. That gives me tremendous flexibility for both retirement income planning and leaving money to heirs.
5. “RMDs are based on my original account balance.”
No. RMDs are recalculated every year using my December 31st account balance and my age. In my early 70s, the withdrawal rate is roughly 4%. By my mid-80s, it’s closer to 6%. This rising percentage is why long-term tax planning matters.
6. “I have to sell investments to take my RMD.”
Not at all. I can take my RMD in kind, meaning I transfer shares of a stock or fund directly into my taxable account without selling anything. That helps me stay invested and avoid triggering capital gains.
7. “Qualified Charitable Distributions don’t count toward RMDs.”
They do if done correctly. A QCD allows me to send money directly from my IRA to a qualified charity, and that amount counts toward my RMD tax-free. The key is that it must come from an IRA, not a 401(k).
8. “I’ll get penalized if I take more than my RMD.”
No penalty at all. The IRS only penalizes you for taking less than your required amount. And while the penalty used to be 50%, it’s now 25%, and can be reduced to 10% if corrected quickly.
9. “RMDs always shrink my account.”
Not necessarily. If my RMD is around 4% and my portfolio grows at 6% or more, my account can still grow even as I withdraw from it. The real challenge later in retirement isn’t running out of money it’s managing increasingly large RMDs from a portfolio that keeps compounding.
Understanding these nine myths has helped countless retirees make smarter decisions, and it can do the same for you. RMDs aren’t something to fear. They’re simply rules to navigate. And once you understand them, they become a manageable and even predictable part of your retirement strategy.
All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.
