Millions of Americans spend decades building their retirement savings, only to become surprisingly careful about spending that money once they stop working. They watch their 401(k)s and IRAs grow, follow the IRS withdrawal rules, and assume they are making the smartest financial decision.
But what if following those rules too closely is actually limiting the retirement they worked so hard to enjoy? Research from J.P. Morgan Asset Management and the Employee Benefit Research Institute found that roughly 84% of retirees in their study who were subject to required minimum distributions withdrew only the minimum amount.
That behavior is not automatically a financial mistake. However, treating the required minimum distribution as the maximum amount you should spend can create problems that many retirees never consider.
What the 84% RMD Study Actually Found
A 2021 research report from J.P. Morgan Asset Management and the Employee Benefit Research Institute examined how retired households used their savings to support everyday spending. The analysis drew on financial information involving approximately 31,000 people who approached or entered retirement between 2013 and 2018.
The findings revealed a strong preference for keeping retirement savings untouched for as long as possible. Even after retirees reached the age when withdrawals became mandatory, most continued taking only the required amount.
| Retirement Withdrawal Behavior | Research Finding |
|---|---|
| Retirees subject to RMDs who withdrew only the required amount | About 84% |
| People below RMD age who had not started withdrawals | About 80% |
| Main pattern observed | Strong reliance on minimum withdrawal rules |
| Research published | 2021 |
| Period covered by the analysis | 2013–2018 |
These findings describe a particular research sample, not every American retiree in 2026. More importantly, they do not establish that everyone following the minimum withdrawal rule was making a mistake.
Some retirees have pensions, Social Security, rental income, or investments outside their retirement accounts. Others intentionally limit withdrawals because they want to reduce taxes or leave money to their families.
The potential problem begins when retirees use the IRS minimum as their entire spending plan without considering their actual needs, financial security, or long-term goals.
What Required Minimum Distributions Really Mean
A required minimum distribution, commonly called an RMD, is the minimum amount the IRS requires eligible retirement account owners to withdraw each year after reaching a specified age. These rules apply primarily to accounts containing money that has not yet been subject to income tax.
Traditional retirement accounts allow contributions or investment earnings to grow on a tax-deferred basis. The government eventually requires distributions so that deferred income can become subject to taxation.
However, an RMD is a mandatory withdrawal amount, not a recommended retirement spending amount. The IRS does not calculate how much money you need for groceries, travel, home repairs, medical treatment, or family activities.
The rules simply determine how much must come out of certain accounts during the year.
Which Retirement Accounts Have RMDs?
Not every retirement account follows the same requirements. Understanding the differences can prevent both missed withdrawals and unnecessary distributions.
| Retirement Account | RMD Required During Owner’s Lifetime? |
|---|---|
| Traditional IRA | Yes, beginning at the applicable age |
| Traditional 401(k) | Generally yes |
| Traditional 403(b) | Generally yes |
| Traditional governmental 457(b) | Generally yes |
| SEP IRA | Yes |
| SIMPLE IRA | Yes |
| Roth IRA | No |
| Roth 401(k) | No, under rules effective since 2024 |
| Roth 403(b) | No, under rules effective since 2024 |
Certain employer retirement plans allow eligible employees who are still working to delay RMDs until retirement. This exception generally does not apply to traditional IRAs or business owners holding at least 5% of the company sponsoring the plan.
Beneficiaries who inherit retirement accounts follow separate distribution requirements. A Roth account that has no lifetime RMD requirement for its original owner can still carry withdrawal obligations for an heir.
The RMD Starting Age Has Changed for Retirees in 2026
One common source of confusion is the age when required distributions must begin. Federal retirement legislation has changed the starting age several times, which means advice written a few years ago may no longer apply.
Under the SECURE 2.0 Act, people born from 1951 through 1959 generally begin RMDs at age 73. People born in 1960 or later generally begin at age 75.
For most retirees covered by these rules, the first required distribution is due for the year they reach the applicable age. They may delay that first payment until April 1 of the following year, but future annual distributions are generally due by December 31.
The first-year deadline deserves special attention. Delaying that first distribution into the following year means taking two RMDs in one calendar year, potentially increasing taxable income considerably.
Anyone approaching their RMD starting age should review the deadline before deciding when to withdraw money.
How a $500,000 Retirement Account Can Create a Much Larger RMD Later
The formula for calculating a required minimum distribution is relatively simple. Divide the account’s December 31 balance from the previous year by the applicable IRS life expectancy factor for the current year.
For example, consider a 75-year-old retiree with $500,000 in a traditional IRA on December 31 of the previous year. Using the standard IRS Uniform Lifetime Table, the distribution factor at age 75 is 24.6.
The calculation is:
$500,000 ÷ 24.6 = $20,325.20
That retiree must generally withdraw at least $20,325.20 for the year, assuming the standard table applies. However, nothing in the rules prevents the retiree from taking $25,000, $35,000, or another amount that better matches their financial plan.
As retirees grow older, the life expectancy factor decreases. This generally requires a larger percentage of the account to be withdrawn each year.
| Age | IRS Life Expectancy Factor | RMD on a $500,000 Balance |
|---|---|---|
| 73 | 26.5 | $18,868 |
| 75 | 24.6 | $20,325 |
| 80 | 20.2 | $24,752 |
| 85 | 16.0 | $31,250 |
| 90 | 12.2 | $40,984 |
These figures assume the same hypothetical $500,000 prior-year account balance at each age and use the standard Uniform Lifetime Table. Actual balances change with market returns, contributions, fees, and withdrawals.
Now consider what happens if investments perform well and a retiree’s account grows despite annual distributions. A person who has $800,000 at age 85 would face a required withdrawal of $50,000 using the standard factor of 16.0.
That $50,000 distribution could create a larger income tax obligation than the retiree expected. It might also affect how much of their Social Security becomes taxable or whether they owe additional Medicare premiums.
This is one reason retirement withdrawal planning should begin before RMDs become mandatory.
Why Taking Only the Minimum Can Become an Expensive Tax Mistake
For many retirees, the strongest reason to limit traditional IRA withdrawals is taxation. Money withdrawn from a traditional retirement account is generally included in taxable income, except for any portion representing previously taxed contributions or other applicable exceptions.
A larger withdrawal can increase the current year’s tax bill. Depending on the retiree’s circumstances, it may also increase the taxation of Social Security benefits or trigger higher Medicare premiums.
Medicare’s income-related monthly adjustment amount, known as IRMAA, generally uses tax information from two years earlier. A substantial taxable distribution in one year can therefore affect Medicare costs later.
However, the opposite problem is also possible.
Retirees who avoid withdrawals for many years may eventually face larger required distributions from accounts that have continued growing. This can leave them with less control over the timing of taxable income.
Consider two hypothetical approaches.
| Strategy | Possible Advantage | Possible Drawback |
|---|---|---|
| Withdraw only the RMD | May reduce current taxable income | Could leave larger taxable balances for later years |
| Withdraw more than the RMD | Can fund additional goals or reduce future account balances | May increase current taxes or Medicare premiums |
| Use planned withdrawals before RMD age | May spread taxable income over more years | Requires careful tax planning |
| Convert some traditional funds to Roth | May reduce future traditional-account RMDs | Conversion usually creates taxable income now |
The best strategy depends on current and expected future tax rates, household income, account balances, marital status, and retirement goals.
Taking more money out is not automatically better. The real opportunity comes from deciding when to recognize taxable income rather than allowing the annual RMD calculation to make every decision.
The Hidden Cost of Saving Too Much for a Future That Never Arrives
Taxes are only part of the issue. Another problem arises when retirees remain emotionally attached to saving money they originally accumulated to support retirement.
During working years, financial discipline often means spending less, saving regularly, and allowing investments to grow. Those habits can help create a comfortable retirement, but they do not always translate smoothly into the spending years.
A retiree might have enough savings to visit family across the country, replace an unreliable car, or take a long-awaited vacation. Yet the thought of withdrawing more than the required minimum can create anxiety.
The account balance becomes a personal measure of financial success. Spending savings may feel like moving backward, even when that spending was the reason the money was accumulated.
There is also an important difference between spending carefully and avoiding worthwhile experiences because of fear.
Someone in their late 60s may have the health and energy to enjoy frequent travel, outdoor activities, or adventures with grandchildren. Those opportunities may become more difficult later, even if their retirement balance continues growing.
Preserving wealth is valuable, but preserving every possible dollar is not always the same as getting the most value from retirement.
Why Retirement Spending Often Changes With Age
Retirement expenses are rarely identical from beginning to end. Many households experience changing spending patterns as their health, interests, family responsibilities, and activity levels change.
Financial planners sometimes describe retirement in three broad stages. These are not fixed rules, but they help explain why withdrawal needs may change over time.
| Retirement Stage | Common Spending Pattern | Financial Consideration |
|---|---|---|
| Early retirement | Travel, hobbies, home projects, active experiences | More flexible spending may be desirable |
| Middle retirement | More time at home, fewer demanding activities | Some lifestyle costs may decline |
| Later retirement | Possible increases in care, assistance, or medical needs | Strong reserves remain important |
Some retirees spend less on travel as they age, while others spend more on medical treatment, caregiving, or home assistance. A serious health event can also change spending suddenly, regardless of age.
This means retirees should not assume expenses will always decline. Instead, they should plan for both enjoyable activities today and financial uncertainty in the future.
An RMD schedule cannot make those personal adjustments. It is based on tax rules and account balances rather than the way an individual household actually lives.
When Taking Only the RMD Is Actually the Smart Choice
Despite the concerns, withdrawing only the required amount can be entirely reasonable. It may even be the most appropriate approach for retirees with other dependable sources of income.
Consider a retired couple whose Social Security benefits and pension income cover their normal living expenses. If their retirement accounts are intended primarily for emergencies, future care, or inheritance, additional withdrawals might serve little purpose.
Taking more from traditional accounts could simply increase their current tax bill without improving their standard of living. In this situation, the minimum withdrawal may align with a carefully developed financial plan.
The same reasoning can apply to retirees with substantial taxable brokerage accounts or other assets available for spending. Using a combination of income sources can provide more flexibility than relying entirely on a traditional IRA.
There is nothing wrong with maintaining a large retirement balance when doing so serves an intentional purpose. The mistake is assuming the minimum withdrawal is always the correct amount without examining the alternatives.
The Retirement Savings Trap That Can Affect Your Heirs
Many retirees limit withdrawals because they want to leave a meaningful inheritance. Preserving traditional retirement accounts can support that goal, but heirs may face tax consequences that deserve attention.
For many nonspouse beneficiaries, inherited traditional IRA money generally must be fully distributed by the end of the tenth year following the original owner’s death. Some beneficiaries may also have annual distribution requirements during that period, depending on when the owner died and other circumstances.
These withdrawals can create taxable income for the beneficiaries. An adult child earning a high salary might inherit an IRA during their highest-income working years, making the additional distributions particularly expensive.
On the other hand, a beneficiary in a lower tax bracket could potentially withdraw inherited funds at a lower tax rate than the original owner would have paid. Special exceptions also apply to certain eligible beneficiaries, including some spouses, minor children, and people who are disabled or chronically ill.
The result depends on the family and the accounts involved.
A retiree who wants to maximize the amount eventually received by loved ones should consider both the account balance and the taxes beneficiaries may owe. Sometimes preserving traditional IRA money makes sense, while in other cases spending or converting part of it earlier may produce a better result.
Four Ways Retirees Can Make Better RMD Decisions
Understanding the problem is useful, but creating a practical plan is what makes the biggest difference. Several strategies can help retirees balance taxes, future security, and the freedom to enjoy their savings.
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RMD Decisions
Keep more control over your retirement savings, manage potential taxes, and make your money work for the life you want.
Review Withdrawals Before RMDs Begin
The years after leaving work but before required distributions begin may offer opportunities to withdraw traditional retirement savings at lower tax rates.
Consider Strategic Roth Conversions
Moving some traditional retirement money into a Roth account may reduce future RMDs. Conversions generally create taxable income in the year they occur.
Use Qualified Charitable Distributions
IRA owners age 70½ or older may be able to send qualifying distributions directly to eligible charities. A QCD can satisfy an IRA RMD without adding that qualifying amount to taxable income.
Build a Spending Plan Around Your Needs
Start with housing, food, healthcare, insurance, and emergencies. Then budget for travel, hobbies, family experiences, and activities you genuinely enjoy.
The IRS Sets the Minimum.
You Set the Strategy.
Your RMD is a withdrawal requirement, not a personal spending limit. The right plan balances taxes, future security, and enjoying the savings you worked to build.
Don’t Confuse the RMD Spending Mistake With Missing an RMD
There is another RMD problem that carries a direct IRS penalty: failing to withdraw the required amount by the deadline. This is separate from the mistake of treating the minimum as a personal spending limit.
Under current rules, the excise tax for an RMD shortfall is generally 25% of the amount that should have been distributed but was not. The rate may be reduced to 10% when the shortfall is corrected within the applicable correction window.
For example, someone who was required to withdraw $20,000 but took only $12,000 would have an $8,000 shortfall. The potential 25% excise tax would be $2,000, separate from ordinary income tax consequences.
The IRS may waive the penalty if the shortfall resulted from reasonable error and appropriate corrective steps are taken. Taxpayers seeking relief generally use Form 5329 and provide the required explanation.
It is also important to remember that RMDs from multiple accounts cannot always be combined freely. Traditional IRA RMDs can generally be aggregated across eligible IRAs, while separate 401(k) plans ordinarily must satisfy their own requirements.
Retirees should confirm the rules for every account they own before assuming one withdrawal covers everything.
A Simple Five-Question Check Before Taking Your Next RMD
Rather than withdrawing the same amount automatically each year, retirees can use a short annual review. These questions help distinguish an intentional financial decision from a habit that may no longer serve their needs.
| Question | Why It Matters |
|---|---|
| Does my RMD cover what I actually need? | The IRS minimum may not match household spending |
| Would taking more money significantly increase my taxes? | Helps identify the cost of larger distributions |
| Could future RMDs become much larger? | Encourages planning for later tax exposure |
| Am I avoiding experiences I can safely afford? | Helps separate financial caution from unnecessary sacrifice |
| What do I want my remaining savings to accomplish? | Connects withdrawals with personal and family priorities |
Answering these questions does not mean withdrawing additional money every year. It simply creates an opportunity to make deliberate decisions based on current finances and future expectations.
A retiree who needs more money for daily life may discover that larger distributions fit comfortably within their long-term plan. Another retiree may confirm that preserving their account balance remains the right decision.
Both outcomes can be financially responsible when supported by realistic calculations.