Knowledge Center Tax Advice for Specific Needs

Required Minimum Distributions (RMDs) for U.S. Expats: How to Calculate & Avoid Penalties

You cannot keep retirement funds in your account indefinitely. According to the IRS, you generally have to start taking withdrawals from your IRA, 401(k), or other retirement plan accounts when you reach age 73. These mandatory withdrawals are called Required Minimum Distributions (RMDs), and missing them can cost you 25% of the amount you should have withdrawn.

Here’s what you need to know: Whether you live in Tokyo, London, or Dubai, U.S. tax law requires you to take RMDs from your traditional retirement accounts starting at age 73. The calculation is straightforward, but living abroad adds complications like time zone deadlines, currency conversions, and potential double taxation.

At Greenback Expat Tax Services, we’ve helped over 23,000 expats file over 71,000 returns while managing their retirement accounts abroad. Many clients are surprised to learn that RMD deadlines don’t adjust for international time zones and that their foreign country may also tax these distributions.

This guide explains exactly how to calculate your RMD, when you must take it, what penalties apply if you miss the deadline, and the specific challenges expats face when managing RMDs from overseas.

What Are Required Minimum Distributions (RMDs)?

Required Minimum Distributions are the minimum amounts you must withdraw from certain tax-deferred retirement accounts each year once you reach age 73. Think of it as the IRS saying: “We’ve let this money grow tax-deferred long enough. Now it’s time to withdraw it and pay taxes.”

Which Accounts Require RMDs?

Accounts subject to RMDs:

Traditional IRAs
SEP IRAs
SIMPLE IRAs
401(k) plans
403(b) plans
457 plans
Other defined contribution plans

Accounts NOT subject to RMDs (while you’re alive):

Roth IRAs
Roth 401(k)s (as of 2024, thanks to SECURE 2.0 Act)
Roth 403(b)s

Important

Even though Roth accounts don’t require RMDs during your lifetime, your beneficiaries will face RMD requirements after inheriting these accounts.

Turning 73 soon and unsure how much you need to withdraw?

Start with clear help calculating your RMD so you can avoid costly penalties.

When Should I Start Taking RMDs?

Current RMD Age: 73

You must begin taking RMDs from your retirement accounts the year you turn 73. This applies to anyone born between 1951 and 1959.

Future change: The RMD age increases to 75 for those born in 1960 or later (starting in 2033).

First RMD Deadline: April 1 of the Following Year

For your first RMD only, you have until April 1 of the year after you turn 73. However, this delay can create a tax trap.

Example: Maria turns 73 on September 15, 2025.

Her first RMD (for 2025): Due by April 1, 2026
Her second RMD (for 2026): Due by December 31, 2026

If Maria waits until April 2026 to take her first RMD, she’ll have to take TWO RMDs in 2026 (one by April 1, one by December 31). This doubles her taxable income for that year and could push her into a higher tax bracket.

Better strategy: Take your first RMD by December 31 of the year you turn 73 to avoid bunching two distributions into one tax year.

All Subsequent RMDs: December 31 Deadline

After your first RMD, all future RMDs must be taken by December 31 each year. There are no exceptions or extensions for this deadline.

How Do I Calculate My Required Minimum Distribution?

The calculation is straightforward: divide your account balance by your life expectancy factor.

Step 1: Find Your Account Balance

Use the balance in your retirement account as of December 31 of the previous year.

Example: To calculate your 2026 RMD, use your account balance as of December 31, 2025.

Step 2: Find Your Life Expectancy Factor

The IRS publishes life expectancy tables in Publication 590-B. Most people use the Uniform Lifetime Table.

Common distribution periods (from IRS Uniform Lifetime Table):

Age 73: 26.5 years
Age 74: 25.5 years
Age 75: 24.6 years
Age 76: 23.7 years
Age 77: 22.9 years
Age 80: 20.2 years
Age 85: 16.0 years
Age 90: 12.2 years

Exception: If your sole beneficiary is your spouse and they’re more than 10 years younger than you, use the Joint and Last Survivor Expectancy Table instead (which results in a smaller RMD).

Step 3: Divide Balance by Life Expectancy Factor

Formula: RMD = Account Balance ÷ Life Expectancy Factor

RMD Calculation Examples

Example 1: Basic Calculation

Situation: Robert turns 74 in 2026. His traditional IRA balance on December 31, 2025, was $500,000.

Calculation:

Account balance: $500,000
Life expectancy factor at age 74: 25.5
RMD: $500,000 ÷ 25.5 = $19,607.84

Robert must withdraw at least $19,607.84 from his IRA during 2026.

Example 2: Multiple Accounts

Situation: Jennifer has three retirement accounts:

Traditional IRA: $200,000
Former employer 401(k): $300,000
SEP IRA: $100,000
Total: $600,000

Jennifer is 75 years old in 2026.

Calculation:

Combined balance: $600,000
Life expectancy factor at age 75: 24.6
Total RMD: $600,000 ÷ 24.6 = $24,390.24

Take Note

Jennifer must calculate the RMD for each account separately, but she can take the total IRA RMD from any combination of her IRA accounts. However, 401(k) RMDs must be taken from each 401(k) separately.

Example 3: Expat with Currency Considerations

Situation: David lives in Japan and turned 73 in 2025. His 401(k) balance on December 31, 2024, was $400,000.

Calculation:

Account balance: $400,000
Life expectancy factor at age 73: 26.5
RMD: $400,000 ÷ 26.5 = $15,094.34

Currency conversion: At an exchange rate of 150 yen per dollar, David’s RMD equals approximately ¥2,264,151. He’ll need to plan for currency fluctuations between when he calculates the RMD and when he actually takes the distribution.

What Are the Penalties for Missing an RMD?

Standard Penalty: 25% Excise Tax

If you fail to take your full RMD by the deadline, the IRS imposes a 25% excise tax on the amount you should have withdrawn but didn’t.

Example: You were required to withdraw $20,000 but only took $15,000. The shortfall is $5,000, and your penalty is $1,250 (25% of $5,000).

Reduced Penalty: 10% if Corrected Quickly

If you correct the shortfall within the “correction window,” the penalty drops to 10%. The correction window ends on the earliest of:

The date the IRS mails a deficiency notice
The date the IRS assesses the tax
The last day of the second taxable year following the year the excise tax was imposed

Example: You missed your 2025 RMD entirely. If you take the distribution in 2026 and file Form 5329 showing reasonable cause, your penalty could be reduced to 10% instead of 25%.

How to Request Penalty Waiver

You can request that the IRS waive the penalty entirely if:

You can show the shortfall was due to reasonable error
You’re taking steps to correct it

Process:

Take the full RMD as soon as possible
File Form 5329 with your tax return
Attach a letter explaining the reasonable cause
Request penalty waiver

Many expats successfully obtain penalty waivers by explaining they were unaware of the requirement while living abroad.

Special RMD Challenges for U.S. Expats

Time Zone Complications

The December 31 deadline doesn’t adjust for international time zones. What’s December 31 in New York might already be January 1 where you live.

Solution: Complete your RMD by mid-December to avoid time zone complications. Don’t wait until the last day.

Currency Exchange Considerations

Your RMD is calculated in U.S. dollars, but you may need the funds in your local currency. Exchange rate fluctuations can significantly impact what you actually receive.

Planning tip: Monitor exchange rates and consider timing your RMD during favorable rate periods (while still meeting the deadline).

Foreign Country Taxation

Many countries tax retirement distributions as ordinary income, creating potential double taxation on your RMD.

Solutions:

Foreign Tax Credit: Claim a dollar-for-dollar credit for foreign taxes paid on the distribution
Tax treaties: Some treaties provide relief for retirement income

Example: Patricia lives in France and takes a $30,000 RMD. France taxes it at 20% ($6,000). Her U.S. tax is $7,200. Using the Foreign Tax Credit, she can reduce her U.S. tax to $1,200 ($7,200 – $6,000).

Custodian Access Issues

Some U.S. financial institutions are reluctant to work with expats. Verify your custodian will:

Maintain your account while you live abroad
Process distributions to foreign bank accounts or addresses
Provide statements and tax documents internationally

Documentation Challenges

Keep meticulous records:

December 31 account statements
Distribution confirmations
Currency conversion rates used
Foreign taxes paid on the distribution

You may need this documentation if the IRS questions your RMD calculation.

Can I Take More Than the RMD?

Yes. The RMD is the minimum amount. You can always withdraw more if needed.

Benefits of taking more:

Reduces future RMDs (lower account balance)
Spreads tax burden across multiple years
Provides flexibility for large expenses

Drawback: You’ll pay taxes on the full amount withdrawn, not just the RMD.

What If I’m Still Working at Age 73?

If you’re still employed and participating in your current employer’s 401(k), you may be able to delay RMDs from that specific 401(k) until you retire.

Conditions:

You must be actively employed (not just consulting)
You cannot own 5% or more of the company
Your plan must allow this delay

This delay only applies to your current employer’s 401(k). You must still take RMDs from:

All IRAs
401(k)s from previous employers
Other retirement accounts

Special Considerations: Inherited Accounts

If you inherited an IRA or 401(k), different RMD rules apply. Learn more about inherited IRA RMD requirements.

Strategies to Minimize RMD Tax Impact

Qualified Charitable Distributions (QCDs)

If you’re charitably inclined, you can donate up to $108,000 (for 2025) directly from your IRA to qualified charities. This distribution:

Counts toward your RMD
Is excluded from your taxable income
Reduces your tax bill

Important

QCDs only work from IRAs, not 401(k)s. The charity must be U.S.-qualified (foreign charities don’t qualify).

Roth Conversions Before RMD Age

Consider converting traditional IRA funds to a Roth IRA before age 73. While you’ll pay taxes on the conversion, future Roth IRA growth and distributions are tax-free, and Roth IRAs have no RMDs during your lifetime.

This strategy works especially well for expats in low-tax countries who can convert while minimizing the tax hit.

Strategic Distribution Timing

If you’re using the Foreign Earned Income Exclusion, your RMD creates taxable income on top of any earned income that exceeds the exclusion amount. Plan your RMD timing around your income patterns to minimize tax brackets.

Common RMD Mistakes Expats Make

Forgetting the December 31 deadline: Living abroad doesn’t extend the deadline. Set calendar reminders in November.
Not accounting for time zones: Complete withdrawals by mid-December if you’re ahead of U.S. time zones.
Calculating RMD for each account but not taking it: You must actually take the distribution, not just calculate it.
Using wrong account balance: Always use the December 31 balance from the prior year, not the current balance.
Overlooking 401(k) aggregation rules: IRA RMDs can be aggregated, but 401(k) RMDs cannot. Each 401(k) requires a separate withdrawal.
Missing foreign tax planning: Failing to coordinate U.S. and foreign taxes on RMD income.

Your RMDs Don’t Have to Be Complicated

Calculating and taking your Required Minimum Distribution is straightforward once you know the rules. The key for expats is planning ahead for:

Time zone deadline management
Currency conversion considerations
Foreign tax coordination
Custodian access verification

Greenback is an American company founded in 2009 by U.S. expats for expats. We focused exclusively on expat taxes and always have. Many of our CPAs and Enrolled Agents are expats themselves, and because they live in 14 time zones, they experience firsthand the challenges of managing U.S. retirement accounts from abroad. They have the knowledge and patience to help you manage the complicated U.S. tax system and your local rules.

Whether you need help calculating your RMD, coordinating foreign taxes, or catching up on missed RMDs through Streamlined Filing Procedures, we can help.

No matter how late, messy, or complex your return may be, we can help. You’ll have peace of mind, knowing that your taxes were done right.

If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.

Ready to have your RMDs calculated and filed correctly each year?

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This article is for informational purposes only and does not constitute tax, legal, or financial advice. RMD calculations can be complex, and individual situations vary. For advice on your specific situation, please consult a qualified tax professional specializing in expat taxation.

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