If you have a retirement account and are over 70½, you’ve probably heard about Required Minimum Distributions (RMDs) – those withdrawals Uncle Sam requires you to take whether you need the money or not. Whether you’re new to RMDs or just want a refresher, here’s what every retiree (and soon-to-be retiree) should know this year.
What Exactly Is an RMD—and Why Should I Care?
During your working years, you saved on taxes by contributing to your workplace plan and/or made contributions to an IRA, if you were eligible. These funds generally avoided taxes until you reached 70 ½. Then the SECURE ACT changed your required age to 72, and finally the SECURE ACT 2.0 changed your required age to 73 for those born in 1951 through 1959. If you are a youngster who was born in 1960 or later, you do not have to take your RMD until you are 75!
Planning ahead can help you avoid headaches, minimize taxes, and even create opportunities to give back to the causes you care about most.
The Big Change: When Do You Have to Start?
If you’re turning 73 this year (born in 1952), your first RMD is due by April 1, 2026. (And yes, if you wait until then, you’ll have to take two RMDs in 2026—which can mean a bigger tax bill.) After that, your RMDs are due by December 31 every year.
Pro tip: Planning your first RMD with a financial advisor can help you avoid a “double whammy” on taxes and keep your income stream steady.
How Much Do You Have to Take Out?
It’s not a guessing game—the IRS uses your account balance and a life expectancy table to determine your minimum withdrawal. Each year, the formula changes a bit as you age and your balance shifts, so it’s wise to check in with your advisor before making any moves.
Do Roth Accounts Have RMDs?
Here’s a win for Roth IRA owners: No RMDs during your lifetime! (Inherited Roth IRAs do have different rules, though, so keep your beneficiaries in the loop.) Roth 401(k)s are now also RMD-free while you’re alive.
New Twists For Inherited IRAs
If you inherited a retirement account recently, there’s a new 10-year rule: most non-spouse beneficiaries must empty the account within a decade. Starting in 2025, if the original owner was already taking RMDs, you may also need to take annual withdrawals—so don’t get caught off guard! Special exceptions apply for spouses, minor children, and others.
What Happens if You Miss an RMD?
The IRS penalty for missing an RMD is nothing to sneeze at: 25% of the amount you should have taken (with a possible reduction to 10% if you catch the error quickly). The best defense is a good offense—schedule your RMDs early and work with your advisor to avoid surprises.
Want to Turn Your RMD Into a Force For Good?
If you’re 70½ or older, you can make a Qualified Charitable Distribution (QCD) directly from your IRA—up to $108,000 in 2025! This satisfies your RMD and keeps that amount out of your taxable income, all while supporting your favorite charities. Even if your first RMD is not until you reach age 73, you can still make QCDs starting at age 70½.
3 RMD Strategies For a Smoother Retirement
- Time it Right: Spread your withdrawals throughout the year or take it all at once—whatever works for your cash flow and tax picture.
- Plan With Your Tax Bracket in Mind: Sometimes, it makes sense to take a little more in a low-income year.
- Get Strategic About Charitable Giving: Use QCDs to lower your tax bill and make an impact in your community.
RMDs don’t have to be a burden—or a mystery. With the right advice and a little planning, you can make RMDs work for your financial goals, not against them.
Have questions or want a personalized RMD game plan? Reach out to your Bloom Advisors team—we’re here to help you make the most of your retirement every step of the way!
