Don’t Miss the Deadline: Why Your Required Minimum Distribution (RMD) Must Be Taken Before the End of the Year

What Is a Required Minimum Distribution (RMD)?

A Required Minimum Distribution (RMD) is the minimum amount most retirees must withdraw each year from their retirement accounts once they reach a certain age. These withdrawals are mandated by the IRS and apply to accounts such as:

  • Traditional IRAs

  • SEP IRAs

  • SIMPLE IRAs

  • 401(k), 403(b), and other employer-sponsored plans

RMDs exist to ensure that individuals eventually pay taxes on the funds accumulated in tax-deferred retirement accounts.

When Do You Have to Take Your RMD?

The End-of-Year Deadline

For most retirees, the RMD deadline is December 31 each year. Missing this date can result in a significant IRS penalty—25% of the amount that wasn’t withdrawn (which may be reduced to 10% if corrected quickly).

If you turned 73 this year (as of 2025), you have until April 1, 2026, to take your first RMD. Every year after that, your RMD must be taken by December 31.

How to Calculate Your RMD

Your RMD amount is based on:

  1. Your account balance as of December 31 of the previous year.

  2. Your IRS life expectancy factor, found in the official IRS tables.

For example, if your IRA balance was $500,000 on December 31, 2024, and your life expectancy factor is 25.6, your 2025 RMD would be roughly $19,531 ($500,000 ÷ 25.6).

Keep in mind:

  • IRAs: You can take your total RMD from one or more IRA accounts.

  • 401(k)s and other employer plans: You must take a separate RMD from each account.

Why It’s Important to Take Your RMD Before Year-End

1. Avoid Costly IRS Penalties

If you fail to withdraw your RMD by the December 31 deadline, you could owe a 25% penalty on the amount not withdrawn. Even though the penalty can be reduced if corrected promptly, it’s best to stay ahead of the deadline.

2. Manage Your Taxes Effectively

RMDs count as taxable income, which can impact your tax bracket, Medicare premiums, and eligibility for certain deductions. Taking your RMD strategically can help minimize your tax burden.

3. Keep Your Financial Plan on Track

Taking your RMD provides a great opportunity to review your full financial picture. You might consider:

  • Using part of your RMD for qualified charitable distributions (QCDs).

  • Reinvesting funds into a taxable investment account.

  • Adjusting your withdrawal strategy for retirement income stability.

Strategies to Make RMDs Easier

Automate Your Withdrawals

Setting up automatic RMD withdrawals through your financial advisor or custodian ensures you never miss the year-end deadline.

Use Qualified Charitable Distributions (QCDs)

If you’re age 70½ or older, you can donate up to $100,000 per year directly from your IRA to a qualified charity. This counts toward your RMD and reduces your taxable income—a smart move for both your finances and philanthropy.

Reinvest What You Don’t Need

If your RMD exceeds your spending needs, consider reinvesting the funds in a taxable brokerage account or using them to rebalance your investment portfolio.

Key Takeaway

Before the year ends, make sure your Required Minimum Distribution is complete. Taking your RMD by December 31 helps you avoid penalties, stay tax-efficient, and keep your long-term financial plan running smoothly.

Schedule Your RMD Review with One of Our Financial Advisors Today!