Understanding RMDs Before the 2025 Deadline - McKee Financial Resources
Understanding RMDs Before the 2025 Deadline
A Plain-English Guide
You've saved for decades. At a certain point, the IRS expects you to begin taking money out of your tax-deferred accounts—whether you need the cash or not.
That's all an RMD is: a scheduled, formula-based withdrawal. Done right, it's routine. Done casually, it can create avoidable complications.
Key RMD Deadlines to Know for 2025
- Your first RMD: Due by April 1 of the year after you reach your RMD age.
- All later RMDs: Due by December 31 each year.
- The "two-in-one-year" trap: If you delay your very first RMD to April 1, you'll still take that calendar year's regular RMD by December 31—two taxable withdrawals in one year.
What's New (and What Isn't) Under SECURE 2.0
- Born 1951–1959 → RMD age 73
- Born 1960 or later → RMD age 75 (beginning 2033)
- Roth accounts: Roth IRAs still have no lifetime RMDs for the original owner. Beginning 2024, designated Roth accounts in employer plans (Roth 401(k)/403(b)/457(b)) also no longer have lifetime RMDs for the owner. (Beneficiaries have their own rules.)
- "Still-working" exception (plans only): If you're still employed and not a 5% owner, many plans allow you to delay your first RMD from that plan until you retire. This exception does not apply to IRAs; check your plan document.
Which Accounts Are Subject to RMDs?
Subject: Traditional IRAs, rollover IRAs, SEP IRAs, SIMPLE IRAs, most 401(k), 403(b), and 457(b) accounts.
Not subject during the owner's life: Roth IRAs (and, starting 2024, designated Roth accounts in employer plans).
How Your RMD Is Calculated
- Use your December 31 prior-year balance.
- Divide by the life-expectancy factor from the IRS Uniform Lifetime Table.
That result is the minimum you must withdraw. You can take more.
Aggregation rule: You may total RMDs across your IRAs and satisfy them from one or any combination of IRAs. Most employer plans require the RMD to be taken from that specific plan.
The Most Complex Area: Beneficiary Rules
When an owner dies, two questions drive the rules: who inherited, and did the owner die before or after their Required Beginning Date (RBD) (April 1 of the year after reaching RMD age).
Year-of-Death RMD
If the owner hadn't taken that year's RMD, it generally still must be taken. Under 2024 final regulations, any beneficiary can satisfy it, and the deadline typically extends to December 31 of the year after death, giving families time to organize.
The 10-Year Rule (Two Versions)
For many non-spouse beneficiaries, the inherited account must be fully emptied by December 31 of the 10th year after the year of death.
- Owner died before RBD: No annual RMDs in years 1–9—just empty by year 10.
- Owner died on/after RBD: Annual RMDs are required in years 1–9 and the account must still be emptied by year 10.
Eligible Designated Beneficiaries (EDBs)
Certain beneficiaries may use life-expectancy payouts instead of the 10-year rule. Common EDBs include a surviving spouse, a minor child of the decedent, and individuals who are disabled or chronically ill (documentation standards apply, particularly for plans).
Spousal Beneficiaries: Special Options
A surviving spouse has multiple paths. A SECURE 2.0 update allows the spouse to elect to be treated as the deceased employee for RMD timing. In plain English: the spouse can often delay RMDs until the decedent would have reached RMD age and then use the Uniform Lifetime Table. The account can remain inherited (distributions not subject to the 10% early-withdrawal penalty) or be rolled over later—run the numbers before electing.
Trusts as Beneficiaries
Trust-named beneficiaries have additional requirements. Recent regulations clarified documentation mechanics and when sub-trusts can apply separate payout rules. If a trust is named, have counsel review the trust against current IRS regulations.
What If You Miss an RMD?
The excise tax for a missed RMD is 25% of the shortfall, potentially reduced to 10% if corrected in a timely manner.
If you think you missed one, coordinate quickly with your tax professional—this often involves making up the distribution and filing Form 5329 with an explanation.
Beyond the Basics: Practical Planning Ideas
Charitable giving from IRAs: For IRA owners age 70½+, Qualified Charitable Distributions (QCDs) can direct funds to qualified charities and may count toward your RMD while keeping those dollars out of adjusted gross income.
Withholding and estimates: Because RMDs are taxable (unless satisfied by a QCD), you can request federal and state tax withholding on distributions to help manage next April's bill.
Two-in-one-year modeling: If your first-year decision falls near the April 1 line, compare the tax impact of taking one RMD this year vs. two next year.
Two Quick Examples
Example 1 — First-year timing:
Dana turns 73 in 2025. She can take her first RMD anytime in 2025 or delay it to April 1, 2026. If she delays, she'll also take her 2026 RMD by December 31, 2026—two withdrawals in 2026. If 2026 will already be a high-income year, taking the first RMD in 2025 may help smooth brackets.
Example 2 — Year-of-death and the 10-year rule:
Luis's father died in November after reaching his RMD age and hadn't taken that year's RMD. Luis and his sister can satisfy the year-of-death RMD by December 31 of the year after death. Because their dad died after his RBD, they also fall under the 10-year rule with annual RMDs in years 1–9 and full payout by year 10.
Your Year-End RMD Checklist
- Confirm your RMD age and first-year deadline. If you're turning 73 this year, decide whether to take your first RMD by Dec. 31 or delay to April 1 next year—and model the tax difference.
- Check each account. IRAs can be aggregated; most plans cannot.
- Confirm beneficiaries. Out-of-date designations are a common source of avoidable headaches.
- If there was a death this year, pause—then plan. Confirm the year-of-death RMD, the owner's RBD status, and which 10-year rule applies.
- If you missed a step, act promptly. Timely correction may reduce the excise tax; coordinate with your CPA on Form 5329.