Three 2026 RMD Rule Changes Retirees Must Know: Cohort-Based Start, Roth Exemptions, and Penalty Relief

The rules for required minimum distributions (RMDs) are no longer a one-size-fits-all mandate. Thanks to the Secure 2.0 Act, the system is now a cohort-specific, multi-stage mechanism that creates divergent income and tax profiles for retirees. The primary structural change is a staged increase in the starting age, creating clear age thresholds based on birth year.

For those born between 1951 and 1959, RMDs begin at age 73. For anyone born after December 31, 1959, the starting age is 75. This creates a direct split: a retiree turning 73 in 2026 must start withdrawals, while someone turning 75 in 2026 has two more years of tax-deferred growth. This cohort-based approach means two people close in age can have different first-RMD years, fundamentally altering their retirement cash flow planning.

The timing of that first withdrawal introduces a critical tax trap. While the law allows a delay until April 1 of the year after you reach the RMD age, doing so typically results in the "two RMDs in one year" tax event. For example, a retiree who turns 73 in 2026 and delays their first distribution until April 1, 2027, will still need to take their regular 2027 RMD by December 31, 2027. This means two taxable distributions in the same calendar year, which can unexpectedly push income into a higher tax bracket.

The calculation itself is standardized, using the Uniform Lifetime Table (Table III) for most account holders. The RMD is determined by dividing the account balance as of December 31 of the prior year by a life expectancy factor from this table. The divisor decreases each year, meaning the required withdrawal percentage increases over time. This default method ensures a predictable, mathematically derived obligation, but the cohort-based start age and the first-year timing choice are the key variables that create the divergent paths.

The bottom line is that RMD planning is now highly personalized. The system is a staged increase, not a single change. Retirees must understand their specific birth-year threshold and the tax implications of delaying their first distribution. This structural shift demands customized planning, as the timing and magnitude of mandatory withdrawals are now determined by a birth year, not a universal age.

The Roth Exemption: A Permanent Tax-Advantaged Accumulation Vehicle

The landscape for retirement savings just got more favorable for those who can access it. A key change from the Secure 2.0 Act has created a powerful new tool: a permanent tax-advantaged accumulation vehicle for new contributions. The law eliminated required minimum distributions (RMDs) on Roth 401(k) plans and Roth 401(b) plans. This is a significant shift, resolving a pre-2022 discrepancy where Roth IRAs were exempt from RMDs while Roth 401(k) plans were not.

The contrast with traditional accounts is stark. While traditional 401(k)s and IRAs allow pre-tax contributions that reduce current taxable income, they come with a mandatory withdrawal requirement starting at age 73. This forces retirees to pay taxes on their savings, often in a higher bracket, and can disrupt portfolio management. The Roth exemption removes that pressure point entirely for new contributions to these employer-sponsored plans. For savers, this means their money can grow tax-free indefinitely, providing a clear path to compound wealth without the forced sale of assets to meet RMDs.

However, the inheritance rules introduce a critical caveat. The exemption applies only while the original account holder is alive. Once a Roth 401(k) or Roth 401(b) plan is passed on to a beneficiary, the RMD clock starts. RMD rules still apply to Roth 401(k) plans once the account is inherited by a beneficiary. This means the beneficiary must begin taking withdrawals, which will be tax-free, but cannot let the account grow untouched forever. The same rule applies to Roth IRAs. This creates a two-tiered system: indefinite tax-free growth for the original owner, but a defined payout period for heirs.

The bottom line is that this change makes Roth 401(k) and Roth 401(b) plans a uniquely flexible option for new savers. They offer the tax-free growth of a Roth with the added benefit of no forced withdrawals during the owner's lifetime. For those building a retirement nest egg, this structure provides a clear advantage over traditional plans, though heirs will still face the standard RMD requirements.

The Penalty Relief: A Reduced Stakes for Non-Compliance

The penalty for missing a required minimum distribution (RMD) has been significantly eased, directly lowering the financial risk for retirees. The penalty for failing to take the required withdrawal is now 25% of the shortfall, a major cut from the previous 50% rate. Even better, that penalty can be reduced to 10% if the account holder corrects the error within two years. This change, enacted by the Secure 2.0 Act, moves the IRS from a punitive stance to a more forgiving one, reducing the immediate cash burden of a mistake. However, the requirement to file Form 5329 with the tax return remains, ensuring the IRS is notified of the shortfall.

The more persistent financial impact, however, is the tax treatment of the RMD itself. Every dollar withdrawn is taxed as ordinary income in the year it is taken. This means the distribution directly increases a retiree's taxable income for that year, potentially pushing them into a higher tax bracket. For example, a retiree with a large traditional IRA balance will see their annual tax bill rise by the amount of the RMD multiplied by their marginal tax rate. This is the core mechanism by which the government collects its deferred tax, and it creates a direct cash-flow drain from the account.

A more permanent structural change is the elimination of RMDs on Roth accounts. The Secure 2.0 Act eliminated required minimum distributions on Roth 401(k) plans and Roth 403(b) plans. This creates a permanent tax-advantaged accumulation vehicle for those who can access it, allowing funds to grow tax-free indefinitely. For retirees who have these accounts, it removes a mandatory withdrawal requirement, offering greater control over when and how to access those funds. This feature, combined with the lower penalty for errors, makes the RMD regime less onerous overall, though the tax on withdrawals remains a fundamental feature of the system.