Turning 73 this year? It is important to take minimum distributions to avoid penalties.
Because the purpose of IRAs is to save for retirement, investors must take required minimum distributions (RMD) from their employer sponsored plan or other retirement account once they reach age 73 (70 1/2 for those born before July 1, 1949). For example, 401(k), 403(b), IRA, SEP IRA, etc.
So, what does that mean for this year? Anyone who was born in 1951 or earlier must make a withdrawal before year-end (December 31, 2025). If you turn 72 this year, your required start age for RMDs is 73. If you turn 73 this year you are required to take your RMD before tax filing deadline of 2026.
It’s important that we initiate your distribution by the appropriate deadline, as failure to withdraw your RMD can result in an IRS penalty of up to 25% of the amount that should have been withdrawn.
While you may have all year to withdraw the money, you can always calculate your 2025 RMD now and plan ahead using the life expectancy tables provided by the IRS. As a refresher, your required withdrawals are based on the balance in your retirement account(s) as of the prior Dec. 31 and the applicable life-expectancy factor based on your age on your birthday this year.
If you are charitably inclined, you may want to direct part or all of the RMD amount toward a qualified charitable distribution (QCD). A QCD can only be made by IRA owners or IRA beneficiaries that are at least age 70 1/2. The maximum allowed QCD for a tax year is $105,000, which must be sent directly to a qualified charitable organization. In most cases, you will report the QCD as a nontaxable distribution from your IRA on your tax return.
Please contact me at 203.791.7249 about your RMD as part of your overall retirement plan.
