Required Minimum Distributions and Your Pension Strategy
By John Schwalenberg | December 2025
If you have money in a traditional IRA, 401(k), or other tax-deferred retirement account, the IRS eventually requires you to start taking money out, whether you need it or not. These required withdrawals are called Required Minimum Distributions, or RMDs, and understanding how they work matters even more if you're building a Pension Strategy with money from one of these accounts.
What an RMD Actually Is
An RMD is the minimum amount you must withdraw each year from a tax-deferred retirement account once you reach a certain age. The rule exists because that money grew tax-deferred for years, and the IRS eventually wants to collect its share of the taxes owed. Withdrawals are taxed as ordinary income in the year you take them.
When RMDs Start
The starting age depends on your birth year. If you were born between 1951 and 1959, your RMDs begin at age 73. If you were born in 1960 or later, your RMDs begin at age 75. Roth IRAs and Roth 401(k)s do not require RMDs during your lifetime, since that money was already taxed going in.
Your very first RMD can be delayed until April 1 of the year after you reach your RMD age. That sounds like a benefit, since it seems like extra time. It can create a bigger problem than it solves.
A caution worth reading twice: delaying your first RMD does not push back your second one. Your second RMD is still due by December 31 of that same year, which means delaying the first one results in two taxable RMDs landing in a single calendar year. For many people, that extra income in one year pushes them into a higher tax bracket or affects other income-based calculations, like Medicare premiums, they were not expecting. Delaying is sometimes the right move, but it should be a deliberate decision, not a default one.
Every year after your first, the deadline is simply December 31.
What Happens If You Miss One
Missing an RMD, or taking less than required, carries a real cost.
Penalty: the IRS can charge a 25% excise tax on the amount you should have withdrawn but didn't. That penalty drops to 10% if you correct the mistake within two years. Either way, this is one area where a small paperwork mistake can carry a genuinely large tax cost.
How This Interacts With an Annuity
If your Fixed Indexed Annuity is held inside a qualified account like an IRA, it is subject to RMD rules the same as any other asset in that account. The insurance company generally calculates the required amount for that specific contract and reports it to you each year, which takes the math off your plate.
This is where a Pension Strategy can actually work in your favor. Many people find that the guaranteed income already coming from their activated income rider satisfies some or all of the RMD requirement on that account, since the withdrawals are already happening on a scheduled basis. Depending on how your accounts are structured, you may also have flexibility to satisfy RMDs across multiple IRAs from a single account, though annuity contracts sometimes have their own rules about this. This is worth confirming directly with your insurance company and your tax professional, since it varies by contract and by how your other retirement accounts are set up.
How This Fits Your Pension Strategy
Since RMDs are coming whether you plan for them or not, timing matters. If your Pension Strategy activation date lines up with your RMD age, the income you were already planning to turn on can do double duty, satisfying your IRS requirement and providing your guaranteed paycheck through the very same withdrawal, instead of you juggling two separate transactions.
RMD rules touch your tax return, so your financial advisor and tax preparer are valuable partners here too. They can help confirm your specific deadlines, coordinate RMDs across accounts they manage, and make sure everything is reported correctly on your return. This article is general education, not personalized tax advice.