If you’ve celebrated your 73rd birthday (or will soon), it’s time to gift yourself with some of your retirement money. It’s called a Required Minimum Distribution, or RMD, and it’s a yearly reminder that Uncle Sam is ready for his share of your tax-deferred retirement savings.
Many retirees are surprised to learn that once they reach age 73, they must begin withdrawing a set amount each year from most retirement accounts — including traditional IRAs and 401(k)s. It’s not optional, and missing a required withdrawal can lead to steep penalties.
Here’s what you need to know for the 2025 tax year.
Why RMDs Exist
For decades, your retirement savings may have grown tax-deferred — meaning you didn’t pay taxes on contributions or earnings along the way. But those deferrals don’t last forever. The IRS requires distributions to ensure that the government eventually collects taxes on that income.
Starting at age 73, you must begin taking out a certain percentage of your account balance each year. The amount is based on your age and life expectancy, as defined by IRS tables. Most financial institutions can calculate your RMD for you, but it’s always wise to double-check before year-end.
When to Take It
You must take your first RMD by April 1 of the year after you turn 73. After that, the deadline for each year’s distribution is December 31.
If you delay your first withdrawal until April, keep in mind that you’ll need to take two RMDs that year — one for your 73rd year and one for your 74th. That can bump you into a higher tax bracket, so timing matters.
Don’t Need the Money? Give It to a Good Cause
If your financial situation doesn’t require the income from your RMD, there’s a tax-smart way to use it: make a Qualified Charitable Distribution (QCD).
A QCD allows you to transfer up to $100,000 per year directly from your IRA to a qualified charity. The donation counts toward your RMD but isn’t included in your taxable income — effectively allowing you to satisfy the IRS requirement while supporting a cause you care about.
It’s a win-win: you reduce your taxable income and make a meaningful impact.
A Few More Tips to Keep in Mind
-Multiple accounts? You’ll need to calculate the RMD separately for each IRA, though you can withdraw the total amount from one if you prefer. (For 401(k)s, you must take a distribution from each account individually.)
-Inherited accounts: If you inherited a retirement account, your RMD rules may differ. The timeline depends on your relationship to the deceased and when they passed.
-Plan ahead: RMDs are taxable income, so consider how the withdrawal will affect your tax bracket and Medicare premiums.
The Bottom Line
Reaching age 73 isn’t just another birthday milestone — it’s a signal to review your retirement withdrawal strategy. Whether you take your RMD to supplement your lifestyle or use it as a charitable gift, being proactive can help you avoid penalties, manage taxes, and make the most of your hard-earned savings.
If you’re unsure how to calculate or time your RMDs — or want to explore charitable giving through a QCD — this is the perfect time to connect with your financial or tax professional before year-end.
After all, the best retirement plan is one that gives you a less taxing life and more prosperous solutions — and keeps the IRS happy.
For personalized tax advice tailored to your specific situation, contact Saunders Tax & Accounting at http://www.saunderstax.com or call us at 301-714-2071. Open Monday – Thursday 9 am to 5 pm. Awarded the Hagerstown Chamber of Commerce “2023 Small Business of the Year” and Hagerstown Hotlist 2024, we have been providing a Less Taxing Life and More Prosperous Solutions since 1984!
