Required Minimum Distributions—RMDs—don’t sound like something that could derail your retirement plan. But if you don’t understand what they are, when they kick in, and how they affect your taxes, they can absolutely catch you off guard.
The COVID grace period gave retirees a bit of breathing room. That time is up.
If you’ve been putting this off (or were hoping Congress would forget), let’s walk through what RMDs are, who they affect, and what you need to do about them this year.
What Are RMDs?
RMDs are the IRS’s way of saying, You’ve had your tax break long enough.
When you save in a traditional IRA, 401(k), or similar retirement account, you get the benefit of tax-deferred growth. But eventually, the government wants its cut.
That’s where Required Minimum Distributions come in.
Starting at a certain age, you’re required to withdraw a specific minimum amount from your retirement accounts each year—and yes, you’ll pay income tax on it.
Who Do RMDs Affect?
If you have a traditional IRA, 401(k), 403(b), SEP IRA, or SIMPLE IRA, RMDs affect you.
And if you turned 73 this year (or earlier), you must start taking those withdrawals by December 31, 2025. For those turning 73 in 2024, this year is your first RMD year.
Roth IRAs are the exception—if they’re in your name, they’re not subject to RMDs during your lifetime. (Roth 401(k)s used to be subject to RMDs, but that changed starting in 2024.)
If you're inheriting retirement accounts, there's a different set of RMD rules—often more complicated, especially after the SECURE Act—but that’s a blog post for another day.
Why This Year Matters
During COVID, Congress temporarily suspended RMDs to give retirees some flexibility while the markets were volatile. That window is closed.
There’s no more delay, no more waiver, and no more time to ignore it.
If you miss your RMD, the penalty used to be a jaw-dropping 50% of the amount you failed to withdraw. Thanks to SECURE Act 2.0, that penalty has been reduced to 25%—and possibly as low as 10% if you correct it in time. But still: ouch.
This is the year to get back on track.
How Are RMDs Calculated?
Each year, your RMD is based on two things: your account balance as of December 31 of the previous year, and a life expectancy factor set by the IRS.
You don’t need to do the math yourself—your custodian (Fidelity, Schwab, etc.) usually calculates it for you. But that doesn’t mean you should blindly accept whatever number they give you, especially if you have multiple accounts.
If you have multiple IRAs, you can take your RMD from just one. But if you have both IRAs and 401(k)s, they each need to be handled separately.
This is where a little strategy can go a long way.
RMDs and Taxes: What to Watch For
Every dollar you withdraw from a pre-tax retirement account gets taxed as ordinary income. That can push you into a higher tax bracket, increase your Medicare premiums, or make more of your Social Security benefits taxable.
Not ideal.
One way to ease the tax sting? Consider a Qualified Charitable Distribution (QCD) if you're over 70½. You can donate up to $100,000 directly from your IRA to a qualified charity, and that amount can count toward your RMD without being included in your taxable income.
It’s a smart move if you’re charitably inclined and want to reduce your tax bill at the same time.
What Women Need to Be Especially Aware Of
Women tend to live longer, and they often retire with less saved—thanks to time out of the workforce, wage gaps, or caregiving responsibilities.
That means RMDs can have a disproportionate impact. If your portfolio is stretched thin already, being forced to take money out (and pay taxes on it) may not align with your financial goals.
That’s why it’s essential to plan before you hit RMD age. Roth conversions, multi-year tax planning, and charitable giving strategies can all help soften the blow.
And if you're a widow or recently divorced, you may suddenly be the sole decision-maker on this. Make sure you understand how these rules apply to your situation—and don’t assume your late spouse’s or ex-partner’s plan automatically works for you now.
What You Should Do Right Now
If you’re subject to RMDs this year, don’t wait until December. Here’s what you should be doing now:
- Review your retirement accounts and confirm which ones are subject to RMDs
- Check the calculated amount—especially if you have multiple accounts
- Decide where you’ll withdraw from (and consider tax efficiency)
- Talk to a financial advisor if you’re unsure or want to explore QCDs or Roth conversion strategies
This isn’t just about compliance—it’s about control. RMDs don’t have to derail your plan, but they do need your attention.
What This Means for You
RMDs aren’t new, but for many retirees, 2024 feels like a rude reintroduction after a multi-year grace period. The IRS isn’t giving extensions anymore, and the penalty for missing one is too steep to ignore.
If you're 73 or older this year—or getting close—make sure you're not caught off guard. And if you're younger, now is the time to start thinking about how to manage future RMDs in a way that supports your long-term goals.
It’s your money. Let’s make sure you stay in control of it.
