If you're 73 or older, there's a good chance the IRS is expecting you to take a required minimum distribution (RMD) this year. These are mandatory annual withdrawals you must take from some of your retirement accounts so the government can get its cut.
It sounds straightforward enough, and there's a chance you may have already fulfilled yours for 2025 without realizing it. But there are also a few tricky rules that, if misunderstood, could lead to costly tax penalties. Here are five you want to avoid.
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1. Assuming you've already fulfilled your RMD without checking
It's possible that you've already withdrawn enough for living expenses in 2025 to fulfill your RMD. But you always want to be sure. If you're wrong, you could pay a 25% tax penalty on your untaken RMD.
You calculate your RMD by looking at your account balance as of Dec. 31 of the previous year -- 2024 for your 2025 RMD -- and dividing it by the distribution period next to your age in the IRS's Uniform Lifetime Table. The result is the minimum you must withdraw to satisfy your RMD. You're free to take out more than this if you need to.
2. Taking RMDs when you don't have to
Beginning in the year you turn 73, you typically have to take RMDs from all of your retirement accounts, with two exceptions. The first is Roth accounts. You usually don't owe the government a cut of your Roth savings, so the IRS has no reason to force you to withdraw money from them.
The other exception is your current workplace retirement plan if you're still employed and own less than 5% of the company. You may delay RMDs from this account only until the year you retire.
This doesn't mean you can't take money out sooner if you'd like to. But if you don't need the extra cash right now, you may prefer to leave your savings untouched in your account so they can continue to grow.
3. Taking all your 401(k) RMDs from a single account
If you have multiple individual retirement accounts (IRAs), you can take withdrawals from a single account to cover all your IRA RMDs. For example, if you have two IRAs, one with a $1,000 RMD and one with a $2,000 RMD, you could take $3,000 from one, $1,500 from each, or whatever combination you like as long as you withdraw at least $3,000 in total from your IRAs.
This doesn't work for 401(k)s. You must take an RMD from each of your 401(k)s individually. But you may be able to get around this by rolling your old 401(k) over into your current plan or by rolling it over into an IRA.
4. Taking your RMD and then giving it to charity
If you don't need your RMD and don't want to pay taxes on the extra money, you can make a qualified charitable distribution (QCD) instead. This is where you donate your RMD (up to a maximum of $108,000 in 2025) to a qualifying tax-exempt organization, and the IRS considers your RMD fulfilled for the year.
However, for it to count as a QCD, the money can't pass through your hands first. You must instruct your plan administrator to transfer the funds directly to the charity. If you don't do this correctly, the IRS will still tax you on your RMD.
5. Missing the RMD deadline
If you just turned 73 in 2025, you have until April 1, 2026, to take your first RMD. However, if you wait until 2026 to take your 2025 RMD, you'll need to take two RMDs next year.
Those older than 73 must complete their 2025 RMD by Dec. 31, 2025. It's best not to wait until the last minute, though. Act within the next few weeks so you can put it behind you for the year.
