Understanding Required Minimum Distributions 2025 (RMDs): Avoid Costly Penalties

Withdrawing money from your retirement account should feel rewarding—but it can turn stressful if you miss or miscalculate your RMD.

Recent changes under the SECURE Act and SECURE 2.0 make it more important than ever to understand RMD rules and plan accordingly. Missteps can cost you thousands, but proper guidance helps you avoid penalties and maximize your retirement income.

What is a Required Minimum Distribution 2025 (RMD)?

A Required Minimum Distribution (RMD) is the minimum amount you must withdraw from your retirement account each year. The IRS created RMDs to ensure that retirement savings eventually get taxed and don’t grow tax-deferred forever.

Who Must Take RMDs?

• Traditional IRA owners must take their first RMD in the year they turn 73.
• If you participate in an employer plan and are still working, you may delay your RMD—but this does not apply to IRAs.

How to Calculate Your Required Minimum Distribution 2025 in 5 Steps

1. Determine Your Distribution Year

The distribution year refers to the year for which you calculate the RMD, not necessarily the year you withdraw the funds.

• You can delay your first RMD until April 1 of the year after you turn 73.
• After that, take all distributions by December 31 of each year.

2. Check Your Retirement Plan Balance

Use your account balance as of December 31 of the prior year, including any outstanding rollovers.

3. Find Your Life Expectancy Factor

Most IRA owners use the Uniform Lifetime Table to find their factor.

• If your spouse is the sole beneficiary and more than 10 years younger, use the Joint Life Expectancy Table.

4. Perform the Calculation

Divide your retirement plan balance by your life expectancy factor.

• This gives your RMD for the year.
• Take your RMD by December 31 (except for the first RMD, which you can take by April 1).
• Any missed portion triggers a steep penalty, so don’t delay.

5. Know Aggregation Rules

• You can aggregate RMDs from IRA accounts.
• You can aggregate RMDs from 403(b) accounts.
• You cannot combine other account types.

Case Study: Avoiding a Costly RMD Penalty

Meet John, age 73:
John owns a traditional IRA and a 403(b) plan. Last year, he forgot to take his IRA RMD but withdrew from his 403(b). Without proper planning, he risked a 50% penalty on the missed RMD—potentially tens of thousands of dollars.

Working with an advisor, John:

1. Calculated both RMDs correctly.
2. Scheduled withdrawals to meet IRS deadlines.
3. Avoided penalties and maximized his retirement income.

The result? John enjoys peace of mind and a smooth retirement income strategy.

Tips to Stay on Track

• Stay updated on SECURE Act and SECURE 2.0 changes.
• Schedule a yearly review with a financial advisor.
• Consider automatic withdrawals to meet deadlines.
• Keep your beneficiary designations current to optimize life expectancy factors.

Get Professional Help With Your Required Minimum Distribution 2025 (RMDs)

Follow our five-step process to calculate your RMD, or speak with one of our knowledgable advisors for personalized guidance.

Call us at 940-464-4104 or schedule a free virtual consultation at RFGWealthAdvisory.com/virtualconsultation.

At RFG Wealth Advisory, we put your best interests first and offer a simple fee structure for peace of mind.

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