Don’t Miss the Deadline: Taking Your Required Minimum Distribution (RMD) by Year-End

Jaclyn Barkow, DBA, EA, CPA

As the end of the calendar year approaches, it is crucial for retirees and some retirement account holders to ensure they have take any Required Minimum Distributions (or RMDs). Significant tax penalties may be imposed if RMDs are not taken. Here’s what you might need to know to avoid costly mistakes.

What is an RMD?

A Required Minimum Distribution (RMD) is the minimum amount an individual must withdraw annually from certain retirement accounts once a specific age is reached. The withdrawals are mandatory and generally taxed as ordinary income. Accounts subject to RMDs include Traditional IRAs, SEP IRAs, SIMPLE IRAs, Employer-sponsored plans (401(k), 403(b), 457(b)), and Inherited IRAs.

Who Must take an RMD… and When?

The RMD age changed with the Secure Act and Secure 2.0 resulting in a somewhat confusing determination of the age at which RMDs begin. For tax years 2019 or earlier, the RMD age was 70 1/2. For tax years 2020, 2021, and 2022, the RMD age was 72. For tax years 2023 and beyond, the RMD age was 73.

Individuals who attained RMD age before 2025, must take their RMD before December 31, 2025. However, individuals who reached age 73 in 2025, the RMD deadline is April 1, 2026. Those individuals who take the first RMD by April 1, 2026, must also take the second RMD by December 31, 2026.

Taxes and Planning

The penalty if the RMD is not taken is 25%, quite costly! So as the year end approaches, if you aren’t sure if you need to take a distribution, be sure to work with your financial advisor or tax professional to determine if a distribution is necessary and how much must be taken. Also consider that RMDs are taxable income which may impact your tax bracket and calculations for Medicare premiums.