If your IRA grows to $2 million, your first required minimum distribution (RMD), the yearly withdrawal the IRS requires from a traditional IRA, would be about $75,472 at age 73. In one steady-growth example, annual RMDs then rise from about $81,300 at age 75 to near $164,700 at age 95. That rise happens because each year uses a new balance and a smaller life-expectancy divisor. Growth can keep pushing the dollar amount up even as you withdraw the required sum.
Table of Contents
- How the IRS figures your yearly amount
- How large payments get as you age
- What big RMDs mean for taxes
- How to stay on track and manage growth
How the IRS figures your yearly amount
Each year's RMD is calculated separately. According to the Internal Revenue Service in its RMD FAQs, you divide the account's prior December 31 balance by a life-expectancy divisor from the IRS Uniform Lifetime Table (its RMD FAQs).
At age 73 the divisor is 26.5. A $2 million prior-year-end balance divided by 26.5 gives about $75,472. Under SECURE 2.0, required withdrawals start at 73 for owners born 1951-1959 and at 75 for those born in 1960 or later, with later-year RMDs due every December 31.
How large payments get as you age
The share you must take grows because the divisor shrinks. The Internal Revenue Service shows divisors of 24.6 at 75, 20.2 at 80, and 16.0 at 85 on its RMD topics page (its RMD topics page). The same $2 million balance would require about $125,000 at 85.
Account growth adds more lift. In a model with 5% annual growth and only RMDs withdrawn, described by Investopedia in its $2 million RMD breakdown, the RMD starts near $81,300 at 75 and rises yearly for two decades to peak near $164,700 at 95 (its $2 million RMD breakdown). Losses would lower the next RMD, while strong returns would raise it.
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What big RMDs mean for taxes
Withdrawn traditional IRA RMDs count as ordinary income at your income-tax rate. Basis returned and qualified Roth distributions are exceptions. A large balance can therefore push you into a higher bracket and raise taxation of Social Security benefits.
A $2 million account makes this effect hard to avoid by skipping withdrawals. The IRS requires the full calculated amount each year. Each dollar withdrawn adds to taxable income for that year.
How to stay on track and manage growth
Each RMD resets off the new prior-year balance. Growth, losses, and withdrawals all change the next amount. Owners of large IRAs commonly use Roth conversions or qualified charitable distributions to manage future RMD-driven income.
Missing an RMD is costly. A missed amount faces a 25% excise tax, reduced to 10% if corrected within two years. A skipped $80,000 RMD could cost $20,000 or $8,000.
- Check your prior December 31 balance before figuring the current RMD.
- Apply the divisor for your exact age that year.
- Take later-year RMDs by December 31 and confirm the transfer cleared.
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