RMDs: That Yearly Deadline You Can’t Ignore
That Yearly Deadline You Can’t Ignore
We all have deadlines. Some are small, like remembering to take the trash out. Others are huge, like filing your taxes.
In retirement, there’s a new deadline that joins the "huge" list: The Required Minimum Distribution, or RMD.
It sounds complicated, but the idea is simple. If you have a traditional retirement account (like a 401(k) or traditional IRA), you’ve been letting that money grow without paying taxes on it. The RMD is just the government's way of saying, "Alright, time to start paying the taxes you owe."
It can feel strange. After decades of saving, being forced to take money out can make anyone feel a little anxious. But RMDs are a normal part of the financial journey, and they are nothing to fear when you have a plan.
The Most Important Dates on the Calendar
So, when does this all start?
The big birthday is age 73.
You must take your very first RMD for the year you turn 73. (A quick note for those in the transition window: If you turned 72 during 2023, your RMD age is 73. This means 2024 is your first RMD year, and your deadline for that first withdrawal is April 1, 2025.)
For this first one, the IRS gives you a little extra time. You can wait until April 1st of the following year.
But here’s the catch: For every single year after that, your deadline is December 31st.
A Quick Word of Warning
If you take that grace period for your first RMD (waiting until April 1st), you will have to take two RMDs in that same year: the one for age 73 and the one for age 74. That could mean a much bigger tax bill.
And you do not want to miss this deadline. The penalty for failing to take your RMD is 25% of the amount you were supposed to withdraw. If you correct the error promptly, that penalty can be reduced to 10%, but it’s still a costly and completely avoidable headache.
How to Take Your RMD the Smart Way
This is where a simple rule becomes a strategic tool. The biggest question investors have is, "What do I sell to get the money?"
This is not the time to guess or try to "time the market." Your RMD is the perfect opportunity to use a disciplined strategy.
Don't Let a Deadline Scare You
RMDs are just a rule of the road. By treating them as a part of your overall rebalancing strategy, you turn a requirement into an opportunity to keep your portfolio healthy and on track for the long term.
RMDs can feel tricky, but you don't have to figure them out alone. If you have questions about your withdrawal strategy or want to make sure your financial plan is working for you, I'm here to help. Let's find a time to talk.
Let’s start the conversation.
Navigating these rules doesn't have to be complicated. If you have questions about your RMD strategy, let's start the conversation. I'm here to help. If you have not had the chance to check out our Financial Fire Drill™ please do so. It is any easy to make sure you have a plan in place.
— The Stahlnecker Team
