The deadline set by the IRS for retirees who turned 73 in 2024 to begin receiving required minimum distributions (RMDs) is fast approaching— April 1, 2025.
On March 13, 2025, the IRS issued a reminder in news release IR-2025-33 regarding the upcoming deadline.
What is an RMD?
A Required Minimum Distribution (RMD) is the minimum amount individuals must withdraw annually from their retirement accounts once they reach a certain age. The purpose of RMDs is to ensure that retirement savings are used for retirement rather than indefinitely deferred for tax benefits.
RMDs apply to most tax-deferred retirement accounts, including Traditional IRAs, Simplified Employee Pension (SEP) IRAs, Savings Incentive Match Plan for Employees (SIMPLE) IRAs, 401(k)s, 403(b)s, and 457(b) plans. Roth IRAs, however, are not subject to RMDs while the original owner is alive.
Who is Affected?
You have until April 1 of the year that follows the year in which you turn the RMD age, to take your first RMD. In this case, retirees who turned 73 in 2024 must begin receiving payments from Individual Retirement Arrangements (IRAs), 401(k)s, and similar workplace retirement plans by April 1, 2025. This applies to IRA owners and plan participants born after December 31, 1950.
Understanding RMD Amounts
RMD amounts will appear in Box 12b of Form 5498, IRA Contribution Information. The RMD amount for 2024 (due by April 1, 2025) will be shown on the 2023 Form 5498, which should have been issued early in 2024.
Beware of Double RMDs
If you delay your first RMD for 2024 until April 1, 2025, you will also need to take your 2025 RMD by December 31, 2025. This means you could have two taxable distributions in the same year, potentially increasing your taxable income.
The Importance of Structuring Retirement Withdrawals Beyond RMDs
The PSCA, referenced research from the EBRI, that found many retirees rely on RMDs as their default withdrawal strategy, often waiting until required to take distributions.
Even as the RMD age increased from 70.5 to 73 (and will reach 75 by 2033), most IRA owners continue this passive approach. In 2019, 85.3% of 71-year-olds took distributions, but when the RMD age shifted to 72 in 2021, only 31.7% did so.
This trend suggests many retirees may be missing opportunities for tax-efficient withdrawals, highlighting the need for proactive retirement planning.
Important Compliance Considerations
The IRS reminder highlights key compliance rules for RMDs, including:
- April 1 Deadline: The April 1 deadline applies to all traditional IRA owners and most workplace retirement plan participants.
- Annual RMDs After Year One: After the first RMD, future distributions must be taken by December 31 each year.
- Affected Retirement Plans: RMD rules apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and 457(b) plans.
- Roth IRAs Are Exempt: Roth IRAs do not require RMDs while the original owner is alive.
- IRA Trustee Responsibilities: An IRA trustee must notify the IRA owner of their required distribution amount or offer to calculate it.
- 5% Business Owners: While most participants can delay RMDs until April 1 after retirement (if their workplace plan allows it), business owners with at least 5% ownership cannot defer and must take RMDs at age 73.
Where to Find More Information
For further details on RMD rules and IRS guidelines, check out these resources:
- IRS News Release IR-2025-33: Visit the IRS website
- Publication 590-B, Distributions from Individual Retirement Arrangements: Includes worksheets, examples, and life expectancy tables to calculate RMDs.
- RMD FAQs: Find answers to common questions about required minimum distributions.
- Tax information for seniors & retirees: For further details on RMDs and other changes impacting retirees and retirement plan participants or visit IRS.gov.
If you have questions about how RMDs impact your retirement planning, Leading Retirement Solutions is here to help. Contact us today to ensure you stay compliant and make informed financial decisions.
