As 2025 begins, there’s an important rule that many senior Americans need to know. If you’re turning 73 years old this year, the IRS requires you to take money out of certain retirement accounts by April 1, 2025. This withdrawal is called a Required Minimum Distribution (RMD), and if you skip it, you could face a 25% penalty on the amount you should have withdrawn.
It’s a serious rule that can affect your retirement savings, but with the right planning, it’s easy to stay on track and avoid penalties.
What Is an RMD and Who Must Take It?
RMD stands for Required Minimum Distribution. It’s the minimum amount you must take out from your tax-deferred retirement accounts every year, starting at age 73 (starting in 2023 and beyond, as per new IRS rules).
This applies to:
- Traditional IRAs
- 401(k)s and other employer-sponsored plans
But it does NOT apply to Roth IRAs, as long as the original account holder is still alive.
If you’re turning 73 in 2025, then 2024 is the year when you become subject to RMD rules. That means your first withdrawal must be made by April 1, 2025.
Why April 1 Is a Key Date for Retirees
The IRS uses your December 31 account balance from the previous year and divides it by a number from their official life expectancy tables to calculate how much you must withdraw.
If you don’t take the RMD on time, the IRS charges a 25% penalty on the amount you didn’t withdraw. If you fix the mistake within two years and file IRS Form 5329, the penalty may drop to 10%.
That’s why April 1 is such a big deal—it’s the final date to avoid these charges if you’re taking your first RMD.
Smart RMD Timing Can Help You Save on Taxes
While the rule gives you until April 1 of the next year to take your first RMD, many financial experts suggest doing it before December 31 of the year you turn 73. Here’s why:
If you wait until April, you’ll have to take two RMDs in the same year—one for the previous year and one for the current year. That could:
- Increase your taxable income
- Raise your Medicare premiums
- Cause more of your Social Security to be taxed
However, if you expect higher income in the year you turn 73, waiting until April might make more tax sense. It’s all about finding the right balance for your personal situation.
What You Should Do Right Now
To stay on the safe side and avoid penalties, here are a few simple steps:
Check how much you need to withdraw. Your financial advisor or bank can help with this.
Schedule the RMD well before April 1, 2025. This avoids delays due to holidays, errors, or processing time.
Plan your withdrawal timing based on your total income. A good strategy can lower your taxes.
If you missed the deadline, act fast. File Form 5329 with the IRS to try and reduce the penalty.