What to Know About Taking Your 2025 RMD

So, though you have until Dec. 31 to take your RMD (if it’s not your first one), financial firms often set earlier deadlines for clients to make RMD requests because they get inundated at the end of the year, says Timothy McGrath, managing partner of Riverpoint Wealth Management in Chicago.   

“You need to be mindful of when those deadlines are,” he says.

If you fail to take your RMD, you’ll have to pay a penalty. SECURE 2.0 made it less costly than it used to be, cutting the penalty from 50 percent of the amount you failed to withdraw to 25 percent (and it could drop to 10 percent if you take the missed distribution in less than two years). But even with the lesser hit, McGrath warns against putting yourself at risk of taking it.

“You need to do whatever you can to get this done,” he says. “The earlier the better, because these things take time.”

Roth accounts are exempt

Historically, Roth IRAs have not been subject to RMDs during the original owner’s lifetime. If you started the account, you may withdraw as much or as little as you want, when you want, at any age.

Until 2024, that did not apply to workplace Roth plans. Now, under a provision of SECURE 2.0, RMD treatment is the same for all Roth accounts. If you own a Roth 401(k) or 403(b), you no longer must make a minimum annual withdrawal, even if you are 73 or older.

Roth accounts do become subject to RMDs once the owner dies and passes them on to heirs, as do traditional IRAs and workplace plans. There are different rules for different types of beneficiaries — for example, spouses who inherit a late partner’s plan can generally spread their withdrawals out over their lifetimes as long as they annually take out the required minimum, while children and other relatives must deplete the account within 10 years.

There are exceptions, however, and they can get complicated. If you inherit a retirement account, talk to the plan provider or another financial professional about your RMD obligations.

RMD amounts are based on life expectancy

If you must take an RMD for 2025, the IRS determines the amount by dividing the balance of your qualifying retirement plan as of Dec. 31, 2024, by what it calls your distribution period. This is the maximum number of years distributions can be taken from the account, based on your estimated life expectancy and factoring in that heirs may continue taking RMDs from the account after you die.

You can determine your minimum withdrawal using AARP’s RMD calculator or do the math yourself by looking up your distribution period in the Uniform Lifetime Table in IRS Publication 590-B.

Say you’re 74 and had $250,000 in a traditional IRA at the end of 2024. According to the IRS, your distribution period is 25.5 years, so you must withdraw at least $9,804. (Different calculations apply in certain circumstances — for example, if the sole beneficiary of your retirement account is a spouse more than 10 years younger than you, or if you are the inheritor of a late spouse’s account.)  

If you have multiple accounts, it doesn’t matter if you take the RMD from one account or divide the total amount among them. “In the eyes of the IRS, you have one account value,” says Mike Lynch, managing director of applied insights at Hartford Funds. All that matters is that you take out the entire amount you owe.

You can spend, save or donate the money

As the name suggests, you must take RMDs whether you need the money or not. But you have options on how to make the withdrawal and what to do with it, with different implications for your taxes and family finances. For example:

Use it for living expenses. Many retirees do need the money, as a primary source of income or to supplement Social Security benefits or a pension. In this case, you can simply take the RMD and deposit it in a checking or savings account to use for daily expenses, bills or holiday gifts, Lynch says.

Use it for your family. Some account holders use RMD income to give money to their children, Leahy says. Others might fund 529 plans for grandchildren or take out a life insurance policy that will benefit their family when they die. “There are all these different ways you can get pretty creative about it,” she says.

Donate it. You can satisfy the RMD requirement by taking a qualified charitable distribution (QCD). Individuals 70½ or older can donate up to $108,000 in 2025 (up from $105,000 the year before) and a couple can donate up to $216,000 (up from $210,000).

You can exclude the QCD from your taxable income even if you take the standard deduction on your tax return, provided that the money goes directly from your retirement account to the charity of your choice. You will owe taxes on the withdrawal if you collect the RMD and then give it to charity (although you can still deduct the donation amount if you itemize on your return).

Reinvest it. You may want the money to continue reaping investment returns or to accumulate interest in a CD or high-yield savings account. If so, you can make the withdrawal and reinvest it, McGrath says. However, you’ll have to pay taxes on the money first.

Regardless of how you plan to use your RMD, talk to a tax professional about how much in taxes you may be on the hook for. If you’re not already doing so, you can ask the plan provider or financial services company that holds the account to withhold estimated taxes on distributions next year and beyond, as an employer might have withheld taxes from your paychecks.  

“What we’ve seen happen if clients aren’t prepared for some of this, is all of sudden there’s a big tax liability that they weren’t even thinking about,” McGrath says.

The key takeaways were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.