Avoid the 25% RMD penalty with these key December deadlines
Retirement savers aged 73 and above must take their required minimum distribution (RMD) by the end of the year. This year, you have until December 31, 2025, or April 1, 2026 if you turned 73 in 2025. Missing the deadline incurs a hefty 25% penalty.
Calculating your RMD involves dividing your traditional IRA or 401(k) balance as of December 31, 2024, by the distribution period for your age in the IRS' Uniform Lifetime Table. You must take RMDs from all traditional 401(k)s unless you're still working and own less than 5% of the company. However, you don't have to take RMDs from Roth accounts.
To avoid last-minute rushes and potential issues, consider taking your RMD in November. This allows time to address any problems and ensures you meet the deadline. If you wait until 2026, you might end up taking two RMDs next year.
A qualified charitable distribution (QCD) offers a tax-efficient way to meet your RMD. You can donate up to $108,000 via QCD in 2025 to a tax-exempt organization and avoid taxation on the amount donated.
Remember, the deadline for taking your RMD is December 31, 2025, or April 1, 2026 if you turned 73 this year. Plan ahead, consider taking your RMD in November, and explore QCDs to maximize your tax benefits. Failure to meet the deadline results in a 25% penalty on the amount you should've withdrawn.
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