What You Need to Do Before Taking Your Required Minimum Distributions (RMD)

A guide to avoid mistakes and make the most of your retirement withdrawals

If you are age 73 or older this year, you must take required minimum distributions (RMDs) from your retirement accounts. If you do not take them on time, the IRS may assess an excise tax.

When taking your RMD along with other transactions, the order matters. If the steps are done out of order, you could face extra taxes, penalties, or missed opportunities for tax savings.

 

Which Accounts Require Required Minimum Distributions?

RMDs apply to:

• Traditional IRAs
• SEP IRAs
• SIMPLE IRAs
• Employer retirement plans like 401(k)s, 403(b)s, and governmental 457(b)s

Good news: Roth IRAs are not subject to RMDs during your lifetime. And since 2024, Roth accounts in employer plans (like Roth 401(k)s) also no longer require lifetime RMDs.

 

The First RMD Year: Special Timing Rules

The first year you must take an RMD is the year you turn 73. You may take it anytime that year, or delay it until April 1 of the following year.

But beware: delaying means you’ll have to take two RMDs in one year – your first RMD plus that year’s RMD. That can push you into a higher tax bracket.

 

Why Order Matters

Here are three common situations where sequencing is critical:

1. Rollovers
   If you move money from a 401(k) or IRA into another account, you must take your RMD first. RMD amounts cannot be rolled over.
2. Roth Conversions
   If you plan to convert some of your IRA to a Roth, your RMD must be withdrawn first. RMDs are not eligible for conversion.
3. Qualified Charitable Distributions (QCDs)
   If you give to charity, you can transfer up to $108,000 (2025 limit) directly from your IRA to qualified charities. This counts toward your RMD and keeps that amount out of taxable income. But the QCD must be made before or instead of your RMD withdrawal.

 

Contact Us for Help With Your IRA and 401(k) Transactions

RMDs are more than just withdrawals. They affect your taxes, charitable giving, and retirement planning. With the right guidance and careful sequencing, you can avoid costly mistakes and even use your RMDs to your advantage.

If you are approaching RMD age or already taking them, now is the time to review your accounts and make sure your strategy is aligned with your financial goals. We are here to help.

By Denise “The IRA Whisperer” Appleby, Appleby Retirement Consulting Inc.