If you’re turning 73 in 2025, there’s a very important financial rule you need to follow. The Internal Revenue Service (IRS) requires people aged 73 to take their first Required Minimum Distribution (RMD) from certain retirement accounts by April 1, 2025.
Missing this deadline can lead to heavy penalties and unwanted tax issues. Let’s break it down in simple terms, so you know exactly what to do and how to protect your hard-earned retirement savings.
What Is an RMD?
An RMD (Required Minimum Distribution) is a mandatory withdrawal that retirees must take from certain tax-deferred retirement accounts, such as:
- Traditional IRAs
- 401(k) and other employer-sponsored retirement plans
RMDs do not apply to Roth IRAs as long as the account holder is alive.
If you turned or will turn 73 anytime in 2024, you must take your first RMD by April 1, 2025. This rule ensures that taxes are eventually paid on money that has grown tax-deferred.
Why the April 1 Deadline Is So Important
The IRS calculates your RMD using a simple formula:
Account Balance on December 31 (last year) ÷ Life Expectancy Factor (based on IRS tables)
While your bank or financial advisor can help calculate the amount, the final responsibility is yours. Missing this withdrawal can lead to a penalty of 25% of the amount you didn’t withdraw.
However, if you fix the mistake within two years and file IRS Form 5329, the penalty may be reduced to 10%.
Example:
If your RMD is $10,000 and you forget to take it, you could be fined $2,500. But if you act quickly and file the form, the fine may drop to $1,000.
Should You Take Your RMD Now or Wait Until April?
You do have a choice. You can:
- Take your first RMD before December 31, 2024, or
- Wait and take it by April 1, 2025
Why timing matters:
If you wait until April 1, you’ll still need to take your second RMD by December 31, 2025, which means two withdrawals in one year—possibly pushing you into a higher tax bracket.
Some financial advisors suggest taking the first RMD in the same year you turn 73 to avoid that situation. However, if you’re expecting high income in 2024, delaying to 2025 could reduce your tax bill.
Steps Retirees Should Take Right Now
To avoid confusion and penalties, here’s what you should do:
1. Confirm your RMD amount
Check with your bank, financial advisor, or use online IRS calculators.
2. Schedule your withdrawal early
Don’t wait until the last week of March—do it early to avoid last-minute delays.
3. Consider your tax situation
Decide if taking your RMD in 2024 or 2025 works better for your overall finances.
4. If you missed your RMD
Act quickly. Take the distribution and file Form 5329 to ask for a reduced penalty.