Will you be 73 years old (or older) at any point in 2025? If so, you'll soon be withdrawing some money you may have in a retirement account. The IRS requires it. It's called a required minimum distribution, in fact, or RMD.
But what's the minimum? It changes with your age, starting at just a little less than 4% of the account's previous year-end value for the year in which you turn 73, and growing to 50% of the account's balance for 120-year-olds.
Just for perspective, though, here's a rundown of the RMDs for a $500,000 IRA at range of ages.
- 73: $18,867.92 (3.77% of account's prior year-end value)
- 75: $20,325.20 (4.06%)
- 80: $24,752.48 (4.95%)
- 85: $31,250.00 (6.25%)
- 90: $40,983.61 (8.20%)
- 95: $56,179.78 (11.24%)
- 100: $78,125.00 (15.6%)
Data source: Investors.gov.
As you can see, the RMD's growth really starts to accelerate the older you get!
There are some other details you'll also want to know about required minimum distributions.
First, although you're required to begin withdrawing money from most IRAs (Roth IRAs are an exception) once you turn 73, you're allowed to begin taking penalty-free withdrawals once you turn 59 1/2.
Second, bear in mind these are only minimums. That doesn't mean you can't remove more, if you so wish.
Finally, just remember these distributions are taxable income. That means they can bump you into a higher tax bracket. Plan accordingly. In this vein, know that while your very first RMD doesn't need to be completed until April 1 of the calendar year after you turn 73 years old, all other required minimum distributions must be completed by Dec. 31 of the year for which they're being made. RMDs are taxable in the year they're taken, though, so it's possible to collect two years' worth of RMDs in one tax year, unnecessarily creating enough taxable income to push you into a higher tax bracket. Again, plan accordingly.
