Thousands of retirees face a 25% penalty from the IRS if they miss an important deadline coming up April 1, 2025. The deadline applies to Americans who turned 73 in 2024 and must now take their first Required Minimum Distribution (RMD) from tax-deferred retirement accounts.
The IRS issued a final reminder this month, warning that missing this deadline could result in steep penalties—and double the tax burden for some.
What Is an RMD and Who Must Take It?
RMDs are mandatory withdrawals from certain retirement accounts. They apply to:
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k), 403(b), and 457(b) plans
Roth IRAs are exempt while the account holder is alive.
If you turned 73 in 2024, you’re required to take your first RMD by April 1, 2025. Going forward, all future RMDs must be withdrawn by December 31 each year.
Miss the April 1 deadline? The IRS could charge a 25% excise tax on the amount you didn’t withdraw. You can reduce the penalty to 10% by correcting the mistake within two years and filing IRS Form 5329.
Why the April 1 Deadline Matters
This deadline is for first-time RMD recipients only. If you delay your first RMD until April 1, you’ll still need to take your second RMD by December 31, 2025. That could result in two taxable withdrawals in one year, which may:
- Push you into a higher tax bracket
- Increase taxes on your Social Security benefits
- Raise your Medicare premiums
Some financial advisors recommend taking your first RMD before December 31 of the year you turn 73 to spread out your income. But if you waited, now is the time to act.
How to Calculate Your RMD
The IRS uses a simple formula:
- Take your retirement account balance as of December 31, 2023
- Divide that amount by your life expectancy factor from the IRS Uniform Lifetime Table
For someone age 73, the life expectancy divisor is typically 26.5. That number can change if your spouse is more than 10 years younger and is your sole beneficiary.
The amount should appear on Form 5498, usually issued early in the year by your financial institution.
Who Can Delay RMDs?
Most retirees must meet the April 1 deadline. However, some workplace plan participants who are still employed may be allowed to delay their RMDs until after they retire—if their plan permits it.
This exception does not apply to:
- 5% business owners
- Participants in SEP or SIMPLE IRAs
- Those with pre-1987 403(b) plan balances (consult your plan administrator)
What Retirees Should Do Now
To avoid penalties and protect your savings, take these steps now:
- Confirm your RMD amount with your financial institution
- Schedule your withdrawal before April 1 to allow for processing time
- Plan ahead to minimize your tax liability from double distributions
- If you missed the deadline, file Form 5329 to potentially reduce the penalty
IRS Tools and Help Available
You can use IRS Publication 590-B to:
- Access life expectancy tables
- See examples and worksheets
- Get help calculating your RMD
Visit IRS.gov for full details on Required Minimum Distributions and additional resources for retirees.
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