The Internal Revenue Service (IRS) has issued a reminder to retirees about required minimum distributions (RMDs) from retirement accounts. To avoid penalties, retirees who are 73 or older in 2024 must take their first RMD by April 1, 2025. RMDs are calculated by dividing the account balance as of December 31 of the previous year by a life expectancy factor provided by the IRS.
The amount that must be withdrawn increases as the account holder ages. Retirees who delay their first RMD until April 1, 2025, will need to take two distributions in 2025—one for 2024 and another for 2025. Both distributions will be taxable income for the 2025 tax year.
Failure to take the required distribution or withdrawing less than the amount necessary can result in a penalty of 25% of the amount not distributed.
Irs issues RMD deadline reminder
The penalty is reduced to 10% if the required amount is withdrawn within two years.
The RMD rules apply to traditional IRAs, 401(k) plans, 403(b) plans, 457(b) plans, and other defined contribution plans. Roth IRAs are not subject to RMDs during the owner’s lifetime. Retirees with multiple retirement accounts must calculate the RMD for each account separately, but they can choose to withdraw the total amount from one or more accounts.
The IRS provides worksheets and calculators to help retirees determine their RMD amount. Account custodians or plan administrators can also calculate the RMD for account holders. Retirees must understand the RMD rules and deadlines to avoid penalties and ensure compliance with IRS regulations.
Those with questions or need assistance should consult a financial advisor or tax professional.
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