Learn About Required Minimum Distribution Calculations for 2025

Understanding Required Minimum Distributions and the 2025 Rules

A Required Minimum Distribution (RMD) is the smallest amount of money you must withdraw each year from certain retirement accounts once you reach a specific age. The IRS sets these rules to ensure that people don't keep retirement savings in tax-deferred accounts indefinitely without paying taxes. Starting in 2025, the age at which RMDs begin has changed due to the SECURE 2.0 Act, which was passed in December 2022.

For individuals who turned 73 years old during 2024 or will turn 73 during 2025, RMDs are required to begin in 2025. This represents a shift from the previous rule, which required RMDs at age 72. The change happened gradually: those who turned 72 in 2023 and earlier still follow the age 72 rule, but the threshold increased to age 73 for those turning 72 in 2024 and beyond. By 2033, the age will increase again to 75 for those who have not yet reached that age.

RMDs apply to several types of accounts, including Traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer-sponsored retirement plans like 401(k)s, 403(b)s, and 457 plans. However, Roth IRAs are treated differently—during the original account holder's lifetime, Roth IRAs are not subject to RMDs. This distinction is important because it affects your withdrawal strategy and overall retirement income planning.

The purpose of RMDs is to generate tax revenue for the government and to prevent indefinite tax deferral. When you contributed to a Traditional IRA or 401(k), you likely received a tax deduction, meaning that money reduced your taxable income that year. The IRS expects to eventually collect taxes on that money and the growth it earned. An RMD forces this to happen by requiring withdrawals that are then taxed as ordinary income.

Practical Takeaway: If you turned 73 in 2024 or will turn 73 in 2025, mark your calendar for your RMD deadline. Understanding which accounts are subject to RMDs helps you plan ahead and avoid costly penalties. Review your account statements to identify all retirement accounts that may trigger an RMD.

How to Calculate Your 2025 Required Minimum Distribution Amount

The RMD calculation follows a straightforward formula: divide your account balance as of December 31 of the prior year by a life expectancy factor provided by the IRS. For 2025, you would use your December 31, 2024 account balance and divide it by the life expectancy factor that corresponds to your age as of December 31, 2025. This calculation typically results in a percentage between 3% and 4% of your account balance for those in their early 70s, though the percentage increases each year as you age.

The IRS publishes three different life expectancy tables depending on your situation. The Uniform Lifetime Table is used by most account holders and applies when you are the account owner and your spouse is not more than 10 years younger than you. If your spouse is more than 10 years younger and is the sole beneficiary of your IRA, you may use the Joint Life and Last Survivor Expectancy Table, which typically results in lower annual withdrawals. If you inherit a retirement account from someone else, different rules may apply depending on whether you are a spouse or non-spouse beneficiary and when the original account owner died.

Here's a concrete example: Suppose you are 73 years old on December 31, 2025, and your Traditional IRA balance was $500,000 on December 31, 2024. According to the Uniform Lifetime Table for age 73, the distribution period factor is 26.5. You would divide $500,000 by 26.5 to get $18,868. This amount is your RMD for 2025. If you have multiple IRAs, you calculate the RMD for each one separately, but you can withdraw the total amount from any combination of your IRAs.

If you have multiple employer-sponsored retirement plans like 401(k)s, you cannot combine them for RMD purposes—you must take the RMD from each plan separately. However, if you have both IRAs and 401(k)s, the RMDs from 401(k)s and IRAs are calculated independently. Some people choose to aggregate their IRAs to simplify the withdrawal process, since you can take your total IRA RMD from just one account if you prefer.

Many financial institutions and custodians calculate your RMD for you and send you a notice stating the amount. However, you are ultimately responsible for calculating and taking the correct amount. If the custodian makes an error in their calculation, you could still face penalties. It's wise to verify the calculation yourself using the IRS tables or by requesting a calculation breakdown from your financial institution.

Practical Takeaway: Gather your December 31, 2024 account statements for all retirement accounts. Use the IRS Uniform Lifetime Table (found in IRS Publication 590-B) to divide each account balance by the appropriate factor for your age. Write down each RMD amount and track which accounts you'll withdraw from to meet the requirement.

The 2025 Deadline and First-Year Exception Rules

The deadline for taking your 2025 RMD is December 31, 2025. However, if 2025 is your first year of RMD requirements—meaning you turned 73 during 2024 or will turn 73 during 2025—you have special flexibility. You can delay your first RMD until April 1, 2026, which is called the "April 1 Rule" or the "grace period for the first distribution." This is a one-time exception for your initial RMD only.

If you choose to use this grace period, understand that you will have two RMDs to take in 2026: your 2025 RMD (taken by April 1, 2026) and your 2026 RMD (taken by December 31, 2026). Taking both distributions in a single calendar year could push you into a higher tax bracket, resulting in increased income taxes that year. For this reason, many people choose to take their first RMD in the year they turn 73 rather than delaying it, spreading the tax burden across two years.

For example, if you turn 73 in July 2025, you could take your first RMD either by December 31, 2025, or by April 1, 2026. If you wait until 2026, you would then need to take your 2026 RMD by December 31, 2026. If your RMD is substantial, having both withdrawals in 2026 might increase your tax bill compared to splitting them between 2025 and 2026.

If your RMD comes from an employer-sponsored plan like a 401(k) or 403(b), and you still work for that employer, you may be able to delay RMDs from that specific plan under the "Still-Working Exception" or "Active Participant Exception." You must meet specific conditions: you cannot own more than 5% of the company, and you cannot be a key employee. This exception does not apply to IRAs. If you have multiple plans and still work for one employer but are retired from another, you may use the exception for the active employer's plan but not for others.

Missing the RMD deadline carries significant penalties. If you fail to take your complete RMD by the deadline, you owe an excise tax equal to 10% of the amount not withdrawn (or 25% under certain circumstances if the shortfall is not corrected). Additionally, the amount you should have withdrawn is still added to your taxable income, so you pay income tax on it even though you didn't receive it. Some taxpayers may be able to request a waiver of the excise tax penalty under limited circumstances, but relying on a waiver is risky.

Practical Takeaway: Mark December 31, 2025 on your calendar as your RMD deadline. If 2025 is your first RMD year, decide whether taking your distribution by year-end or using the April 1 grace period makes more tax sense for your situation. Consult with a tax professional or financial advisor to model both