Traditional IRAs, 401(k)s, and other similar retirement accounts enable you to save money before taxes, allowing your money to grow for decades. However, the IRS will eventually require you to begin withdrawing a portion of your savings on an annual basis. These withdrawals are known as required minimum distributions, or RMDs, and the income you take out is taxed at your regular tax rate. Understanding how the 2025 RMD rules work may allow you to avoid penalties and better plan your retirement income.
Changing RMD Ages Under SECURE 2.0
Prior to recent legislative changes, retirees had to begin taking RMDs in the year they turned 72, though the first withdrawal could be postponed until the following April. The SECURE 2.0 Act, which was passed in 2022, changed this timeline so that retirees could keep their money in their accounts for longer periods of time. Beginning in 2023, the RMD age will rise from 72 to 73. Beginning in 2033, the RMD age will be raised again to 75.
This means that depending on your birth year, your RMD starting age may differ from someone who is just a few years older or younger. The goal of these changes is to account for longer life expectancy and to allow retirement savings to grow for a longer period before mandatory withdrawals begin.
| Year | RMD Starting Age |
| Before 2023 | 72 |
| 2023-2032 | 73 |
| 2033 and Beyond | 75 |
Pay Attention to Deadlines
You typically have until December 31st of each year to complete your RMD. Your first RMD is an exception, as it can be taken by April 1st of the following year. However, the process is not automated. Typically, you must contact your financial institution, complete forms, and then wait for the distribution to be processed. Many businesses set earlier internal deadlines because the end of the year brings increased demand.
Failure to take your RMD on time may result in costly penalties. SECURE 2.0 reduced the traditional 50% penalty to 25%, and it could be as low as 10% if the mistake is corrected within two years. Despite the lower penalty structure, it is still critical to make withdrawals early enough to avoid last-minute complications.
Roth Accounts and RMD Rules
A significant change for retirees affects Roth workplace accounts. Roth IRAs have long been exempt from lifetime RMDs, which means that owners are never required to withdraw funds if they prefer to keep them invested. However, RMDs were previously required for Roth 401(k)s and Roth 403(b)s.
Beginning in 2024, all Roth accounts will have the same rule: no RMDs during the original owner’s lifetime. That means you don’t have to take an RMD from your Roth workplace plan if you’re over the age of 73.
When the owner dies, Roth accounts, like other retirement accounts, become subject to RMD rules for heirs. The rules vary depending on whether the beneficiary is a spouse, minor child, or another type of inheritor. Some heirs must deplete the account within ten years, whereas spouses may have more lenient withdrawal requirements. Because inheritance rules can be complicated, anyone who inherits a retirement account should consult a plan administrator or a tax professional to better understand their responsibilities.
How Your RMD Amount Is Calculated
If you need to take an RMD, the IRS has a straightforward formula. The agency divides the balance of your qualifying retirement accounts as of December 31, 2024, by a number known as the distribution period. The distribution period is based on your life expectancy and assumes that beneficiaries will continue to make necessary withdrawals after your death.
The IRS Uniform Lifetime Table, which can be found in Publication 590-B, contains the correct distribution period. Many people use online tools like RMD calculators to estimate their required amount.
Consider someone who will be 74 at the end of 2024 and has a traditional IRA balance of $250,000. Let’s say their distribution period is 25.5. So, they must withdraw at least $9,804 for their RMD. If your spouse is more than ten years younger and the sole beneficiary, or if you inherited an account from a spouse, you must follow special rules.
If you have multiple traditional IRAs or employer retirement plans of the same type, the total required withdrawal is calculated based on the combined balances. You can withdraw the entire RMD from one account or divide it among several; the important thing is that you withdraw the total required amount.
What You My Want To Do With The Money From Your 2025 RMD
Whether or not you require the funds, you must take your RMD. Once the money is withdrawn, you have several options for how to spend it. Each option has different tax and family planning implications.
1. Use the Money for Your Expenses
Many retirees rely on RMDs as a regular source of income, sometimes supplementing Social Security or pension payments. You can simply transfer the funds to your checking or savings account and use them for daily expenses, travel, home repairs, or anything else you need.
2. Support Children or Grandchildren
Some retirees may use their required minimum distribution to assist family members. This could entail giving money to adult children, contributing to a 529 college savings plan for grandchildren, or purchasing life insurance to provide future financial stability. These strategies can be used to intentionally transfer wealth.
3. Donate the Withdrawal to Charity
One popular option is a qualified charitable distribution (QCD). Individuals 70½ and older can donate directly from their IRA to a qualified charity. In 2025, the maximum amount is $108,000 per person or $216,000 per couple. The amount donated through a QCD counts toward your RMD. Because the money is sent directly to the charity, it is not added to your taxable income.
This is not the same as taking the RMD and then donating the cash. In that case, the withdrawal is still taxable, though you can claim a charitable deduction if you itemize.
Planning for Taxes and Withholding
Because an RMD is considered taxable income (unless it comes from a Roth account or is routed through a QCD), you should estimate how much tax you may owe on your 2025 RMD. Many retirees prefer to have taxes withheld directly from their withdrawals, just as taxes were withheld from their paychecks while they were working. This may help to avoid surprises at tax time and make budgeting simpler.
Source: AARP