RMDs Made Simple: Roth IRAs, Traditional IRAs, and Inherited Accounts Explained

Required Minimum Distributions (RMDs) can be confusing, especially because the rules are different depending on the type of account you have. Whether you’re nearing retirement or handling a loved one’s estate, understanding how RMDs work can help you avoid IRS penalties and make smarter decisions.

This article breaks down RMDs clearly with real examples you can follow.

Understanding the Foundations of Effective Tax Preparation Strategies

What Are RMDs?

RMDs are the mandatory withdrawals the IRS requires from certain retirement accounts once you reach a specific age.

Here’s the simple rule:

• Traditional IRAs require RMDs.

• Roth IRAs (your own) do not require RMDs.

• Inherited IRAs and inherited Roth IRAs have their own rules, which is where most people get tripped up.

  
  

If you miss an RMD, the IRS can charge a penalty of 25% of the amount you were supposed to take, so it’s important to understand how these rules apply to you.

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RMD Rules for Traditional IRAs

Traditional IRAs are funded with pre-tax money. That means you didn’t pay tax when you contributed, so the IRS wants to tax it later.

When Do RMDs Start?

• RMDs begin at age 73.

• Your first RMD is due by April 1 of the following year.

• Every RMD after that is due December 31 each year.

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How RMDs Are Calculated

The IRS uses a simple formula:Account balance on Dec 31 of last year ÷ Life-expectancy factor

Example:If you had $365,000 in your IRA at the end of the year and your IRS factor is 25.5, your RMD is:$365,000 ÷ 25.5 = $14,314

That $14,314 becomes taxable income to you.

Why Traditional IRA RMDs Matter

Taking RMDs can impact:

• Your tax bracket

• Your Medicare premiums

• How much of your Social Security is taxed

That’s why many people start planning their RMD strategy several years ahead.

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RMD Rules for Roth IRAs

This is where Roth IRAs shine.

No RMDs for Original Owners

If the Roth IRA belongs to you:

• You never have to take an RMD

• Your money can continue to grow tax-free

• Qualified withdrawals are completely tax-free

  
  

This makes Roth IRAs an excellent tool for long-term tax planning and passing money to heirs.

Inherited Traditional IRAs

If you inherit a Traditional IRA, the rules depend on your relationship to the original owner.

If You’re the Spouse

You have the most options:

• You can treat the IRA as your own

• You can wait until age 73 to begin RMDs

• You can also keep it as an inherited IRA if the age difference makes that strategy better

If You’re NOT the Spouse

(Most children, grandchildren, siblings, etc.)

You usually fall under the 10-Year Rule:

• You must empty the account by December 31 of year 10 after the original owner passed

• Depending on the owner’s age, you may also have to take annual RMDs in years 1–9

  
  

Example

If your father dies at age 78 and leaves you his IRA (and he was already taking RMDs):

• You must take RMDs every year

• The entire account must be drained by year 10

• All withdrawals are taxable income to you

This catches many beneficiaries by surprise.

Inherited Roth IRAs

Even though Roth IRAs are tax-free, the RMD rules still apply for inherited accounts.

If You’re the Spouse

You can treat the inherited Roth as your own.That means:

• No RMDs for life

• Tax-free growth

• Complete flexibility

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If You’re NOT the Spouse

You are under the 10-Year Rule, even though the withdrawals are tax-free:

• You must empty the account within 10 years

• Most people do not need annual RMDs, but the account must not remain untouched until year 10

• The penalty for missing these rules still applies

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Example

Your mother leaves you her Roth IRA:

• No taxes on any withdrawals

• But you still must empty the account by year 10

• Waiting until year 10 could create large forced withdrawals (even tax-free ones)

  
  

Inherited Roth vs. Inherited Traditional IRA: The Key Differences

Here’s the simplest way to understand it:

Feature	Inherited Traditional IRA	Inherited Roth IRA
Taxes on withdrawals	Yes	No
Subject to 10-year rule?	Yes	Yes
Need annual RMDs?	Sometimes	Usually no
Must be fully withdrawn in 10 years?	Yes	Yes
Affects your tax bracket?	Yes	No

Bottom line:A Roth IRA avoids taxes, but it does not avoid RMD rules when inherited.

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Common RMD Mistakes People Make

Some of the most frequent issues we see include:

• Forgetting the first RMD at age 73

• Not realizing inherited Roth IRAs still have deadlines

• Taking the wrong RMD amount from the wrong account

• Waiting until year 10 and causing large taxable withdrawals

• Not coordinating RMDs with Social Security or Medicare timing

These are avoidable with the right plan.

How Pacific Data can help

RMDs don’t have to be stressful. We help clients:

• Calculate their RMDs correctly

• Build tax-efficient withdrawal strategies

• Avoid IRS penalties

• Evaluate Roth conversions before age 73

• Structure inherited IRA withdrawals the right way

• Plan retirement distributions with long-term taxes in mind

Clear guidance now can save thousands later and protect the savings you’ve worked hard for.