The Clock Is Ticking: What Every Retiree Must Know About RMDs Before Year-End

Do you remember the first time you heard a song on cassette and realized the tape was about to run out—just as the chorus was peaking? Or maybe you recall standing in line at the bank before ATMs, glancing at the clock, and wondering if you’d make it before the doors closed. Deadlines have a way of sneaking up, and in retirement, one of the most important deadlines you can’t afford to miss is your Required Minimum Distribution (RMD).

If you’re 73 or older, the clock is ticking. Time is running out to take your RMDs, and missing the deadline can mean steep penalties, higher taxes, and unnecessary financial stress.

• RMDs are mandatory withdrawals you must take from most retirement accounts starting at age 73.
• Deadlines matter: the first RMD can be delayed until April 1 of the year after you turn 73, but then you’ll face two withdrawals in the same year. Every year after, RMDs must be out by December 31.
• Penalties are serious: missing or under-withdrawing can trigger a tax of up to 25%, reduced to 10% if corrected quickly.
• Not all accounts are affected: Roth IRAs (and Roth 401(k)s after 2024) have no RMDs for the original owner.
• You can’t roll them over, but you can donate them: Qualified Charitable Distributions (QCDs) let you give directly to charity while satisfying RMD rules.
• Act now: talk with your custodian, advisor, or tax professional to ensure your RMDs are taken correctly and on time.

What Is an RMD, and Why Should You Care?

An RMD is the government’s way of saying, “It’s time to pay taxes on the money you’ve been deferring for decades.” For many Gen X and Boomer retirees, this applies to traditional IRAs, 401(k)s, 403(b)s, 457(b)s, and similar plans.
You’ve spent your working years saving diligently. Now, the IRS requires you to withdraw a portion each year starting at 73, even if you don’t need the cash. Fail to comply, and the penalty could feel harsher than rewinding a VHS tape only to find it snapped.

• First Year: You must take your first RMD by April 1 of the year after you turn 73.
  • Example: If you turned 73 in 2025, you could delay until April 1, 2026.
  • But beware: you’ll also owe your 2026 RMD by December 31 of that same year. That means two RMDs in one tax year, which could push you into a higher tax bracket.
• Every Year After: All RMDs must be withdrawn by December 31. No exceptions, no grace period. It’s like the countdown to midnight on New Year’s Eve, the ball will drop whether you’re ready or not.

• Subject to RMDs:
  • Traditional IRAs
  • SEP and SIMPLE IRAs
  • 401(k), 403(b), and 457(b) accounts
  • Profit-sharing plans
• Not subject to RMDs (for the original owner):
  • Roth IRAs
  • As of 2024, Roth-designated accounts like Roth 401(k)s and Roth 403(b)s

This means if you have a Roth IRA, you can let it keep growing untouched. That’s one advantage in a retirement world full of rules and restrictions.

The formula is straightforward:

For example, if your account balance was $265,000 at age 73, you’d divide by 26.5 (the IRS factor). Your RMD would be $10,000. The IRS provides tables (Uniform Lifetime Table and Joint Life Table) depending on your situation.

Think of it like those multiplication tables you memorized in school—only this time, the answers affect your tax bill.

Here’s where it gets tricky:

• You must calculate RMDs separately for each IRA. But you can take the total RMD from just one IRA.
• 403(b) accounts can be aggregated with other 403(b)s.
• 401(k) and 457(b) accounts must each satisfy their own RMDs individually.

So, while you may be able to simplify, you can’t cherry-pick across all account types. It’s like juggling vinyl records—you need to keep track of which one is on the turntable.

Miss an RMD or take too little, and you’ll owe up to 25% of the shortfall. Correct it quickly, and the penalty may drop to 10%.

Example: If your RMD is $10,000 and you only withdraw $6,000, you’re short $4,000. The penalty could be $1,000 (25%) unless corrected. That’s money that could have been used for travel, healthcare, or helping your grandkids with college.

• Taxes: RMDs are taxed as ordinary income. If you’re in the 22% bracket, a $10,000 RMD adds $2,200 to your tax bill.
• No Rollovers: You cannot roll an RMD into another tax-advantaged account.
• Inherited Accounts: Most non-spouse beneficiaries must empty inherited retirement accounts within 10 years of the original owner’s death. Exceptions apply for spouses, minor children, and those who are disabled or chronically ill.

RMDs don’t have to be purely a burden. Some strategies can soften the impact:

• Qualified Charitable Distributions (QCDs): Donate up to $108,000 (2025 limit) directly from an IRA to a qualified charity. This satisfies your RMD and avoids taxable income.
• Roth Conversions: Convert some savings to a Roth IRA before RMD age. You’ll pay taxes now, but future RMDs will be smaller.
• Early Withdrawals: Taking distributions before 73 can reduce account balances and future RMD amounts.
• Company Stock (NUA): Special rules for Net Unrealized Appreciation can lower taxes on employer stock in retirement plans.

• Automate It: Many custodians will calculate and even set up automatic withdrawals for your RMDs.
• Double-Check: You’re still ultimately responsible, even if your custodian helps.
• Avoid the Double Hit: If you’re delaying your first RMD, plan for the tax consequences of taking two in one year.
• Mark the Calendar: Just as you wouldn’t miss a milestone birthday or wedding anniversary, treat the December 31 deadline as non-negotiable.

RMDs may feel like another government chore, but they’re really about protecting your retirement plan from unexpected penalties and taxes. For Gen X and Boomers who grew up balancing checkbooks by hand and waiting for the 6 o’clock news, the discipline of deadlines is nothing new. Think of RMDs as another important date circled on your calendar.n

Don’t wait until the ball drops on December 31. Take control, make your withdrawals, and keep more of what you’ve earned.

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This article is not intended to be a substitute for professional financial advice from a qualified financial advisor.