When Is My RMD Due? Deadlines and Rules to Know

A Required Minimum Distribution, or RMD, is a mandatory withdrawal from certain tax-advantaged retirement accounts. These rules ensure that individuals use the funds during their retirement years, rather than accumulating wealth in these accounts indefinitely. This system prevents retirement accounts from being used as estate planning tools to pass down wealth that has never been subject to income tax.

RMD Deadlines for Account Owners

The timeline for taking your first RMD is determined by your “Required Beginning Date” (RBD). The SECURE 2.0 Act adjusted the age at which these distributions must start. For individuals born between 1951 and 1959, the RMD age is 73. If you were born in 1950 or earlier, your RMDs should have already started under the previous age 72 requirement. The law further pushes the age to 75 for those born in 1960 or later.

Your First RMD

A special rule applies to your first RMD, providing some flexibility. You have the option to delay this initial withdrawal until April 1 of the year following the year you reach your RMD age. If you choose this option, you will be required to take two distributions in that following year: the first RMD by April 1, and the second RMD for the current year by its regular deadline. This can increase your taxable income, potentially pushing you into a higher tax bracket.

All Subsequent RMDs

After your first RMD, the deadline is December 31 for every subsequent year. A notable exception is the “still working” exception. If you are employed past your RMD age and participate in your current employer’s retirement plan, such as a 401(k), you may delay taking RMDs from that specific plan until you retire. This exception does not apply if you own 5% or more of the business. The delay only applies to the plan of your current employer; you must still take RMDs from other retirement accounts like Traditional IRAs or 401(k)s from previous employers.

RMD Deadlines for Beneficiaries

The rules for individuals who inherit retirement accounts are distinct and depend on their relationship to the original account owner and when the owner passed away. The SECURE Act significantly altered these rules, primarily affecting those who inherited accounts after December 31, 2019.

Spousal Beneficiaries

A surviving spouse has the most flexibility when inheriting a retirement account. One option is to treat the inherited IRA as their own by rolling it over into their personal IRA, which allows the spouse to follow RMD rules based on their own age. Alternatively, the spouse can treat the account as an inherited IRA. This allows them to take RMDs based on their own life expectancy or delay distributions until the year the deceased spouse would have reached RMD age.

Eligible Designated Beneficiaries (EDBs)

A category known as Eligible Designated Beneficiaries (EDBs) can follow more favorable distribution schedules. EDBs include the deceased owner’s minor children, individuals who are disabled or chronically ill, and beneficiaries who are not more than 10 years younger than the account owner. These beneficiaries are permitted to take distributions over their own life expectancy, a method called the “stretch” rule.

Non-Spouse Beneficiaries (The 10-Year Rule)

Most non-spouse beneficiaries who inherit an account are subject to the 10-year rule. This rule mandates that the entire balance of the inherited account must be withdrawn by the end of the 10th year following the owner’s death. For instance, if the owner died in 2021, the account must be fully distributed by December 31, 2031. If the original account owner had already started taking their own RMDs, the beneficiary must also take annual distributions in years one through nine of the 10-year period.

Meeting Your RMD Obligation

To satisfy your annual RMD, you first need to calculate the correct amount. The calculation requires the fair market value of your account as of December 31 of the preceding year and a life expectancy factor from the appropriate IRS table. For most account owners, this will be the Uniform Lifetime Table, found in IRS Publication 590-B. The account balance is divided by the distribution period factor that corresponds to your age to determine the minimum amount you must withdraw for the year.

Your financial institution may report the RMD amount to you or offer to calculate it, but the ultimate responsibility for taking the correct amount rests with you. Another method for satisfying the RMD is through an “in-kind” distribution. This involves transferring securities, such as stocks or mutual funds, from your retirement account to a non-retirement, taxable brokerage account. The fair market value of the securities on the date of the transfer counts toward your RMD, and you will owe income tax on that amount.

Penalties for a Missed RMD

Failing to take your RMD by the deadline can result in a financial penalty. The SECURE 2.0 Act reduced the penalty, and the current excise tax is 25% of the RMD amount that was not withdrawn. The law provides an opportunity to reduce this penalty further. If you correct the shortfall by withdrawing the required amount within a “correction window,” the penalty drops from 25% to 10%. This window extends for two years after the year the RMD was missed.

If you miss an RMD due to a reasonable error, you can request a waiver of the penalty from the IRS. You must first withdraw the missed amount as soon as you realize the error. You then need to file IRS Form 5329 with your federal tax return. You should attach a letter explaining the reason for the shortfall, such as an illness or an error by the financial institution, to demonstrate reasonable cause.