If you’re age 73 or older, the IRS requires you to withdraw a certain amount from your retirement account each year. This withdrawal is called a Required Minimum Distribution (RMD).
RMDs are one of the most important parts of managing your retirement account, because failing to take them on time can result in steep IRS penalties. Here’s what you need to know:
Why RMDs Exist
When you contribute to a Traditional IRA or another tax-deferred retirement account, you don’t pay taxes on that money right away. The IRS eventually wants to collect those taxes—so beginning at age 73, they require you to withdraw a minimum amount each year.
Who Must Take RMDs?
- Traditional IRA owners starting at age 73 (as of 2025).
- SEP IRAs and SIMPLE IRAs also follow RMD rules.
- Inherited IRAs may require RMDs, even if you’re younger than 73.
- Roth IRAs are exempt while the original owner is alive, but beneficiaries may have requirements.
When Do RMDs Need to Be Taken?
- Your first RMD is due by April 1st of the year after you turn 73.
- Every year after, RMDs must be taken by December 31st.
- Missing the deadline can result in a 25% IRS penalty on the amount not withdrawn (which may be reduced to 10% if corrected quickly).
How Are RMDs Calculated?
The IRS provides a Uniform Lifetime Table that factors in:
- Your age
- The balance of your retirement account as of December 31st of the previous year
MidAtlantic IRA provides clients with their RMD calculation each year, so you don’t need to figure it out on your own. For self-directed accounts, this calculation depends on the Fair Market Values (FMVs) you provide — so it’s important that your asset valuations are accurate and up to date.
What Happens If You Don’t Take Your RMD?
Failing to withdraw the required amount comes with one of the harshest IRS penalties:
- 25% excise tax on the amount not taken
- Reduced to 10% if corrected within two years
That’s why it’s so important to plan ahead and request your RMD early.
Tips for Staying on Track
- Mark your calendar each year with the December 31 deadline.
- Consider taking your RMD earlier in the year to avoid holiday delays.
- Submit requests by MidAtlantic IRA’s internal deadline (for 2025, that’s November 15) to guarantee smooth processing.
- Talk to your advisor about strategies like Qualified Charitable Distributions (QCDs), which can satisfy your RMD while giving to charity.
Additional Resources
- IRS: Required Minimum Distributions (RMDs)
- MidAtlantic IRA: How MidAtlantic IRA Processes Required Minimum Distributions (RMDs)
- MidAtlantic IRA: When Should I Take My RMD?
Bottom line: RMDs are simply the IRS’s way of making sure retirement dollars in tax-deferred accounts eventually get taxed. With the right planning and timely requests, they don’t have to be stressful.