The U.S. Internal Revenue Service (IRS) issued an alert reminding retirees that some of them are obligated to withdraw money from their retirement accounts by the beginning of next month.
RMDs are “typically made by year-end. However, individuals who turned 73 in 2024 can delay their first RMD until April 1, 2025. This special rule applies to IRA owners and participants born after Dec. 31, 1950.”
While the April 1 deadline applies to most workplace retirement plan participants and all traditional IRA owners, some people with workplace plans are able to delay their RMDs, the agency said.
The IRS clarified that the April 1 deadline applies only to the first year. Withdrawals must be made by Dec. 1 for all subsequent years.
As such, taxpayers who take their first RMD for 2024 by April 1, 2025, will also have to take their 2025 distribution by Dec. 31 this year, resulting in two RMD withdrawals in a single year. Both amounts are to be reported in the 2025 tax returns.
“This strategy may make sense if you’re still bringing in steady income, but for most people, it’s usually better to take the distribution by the end of the year rather than wait until April 1.”
For subsequent years, the timing of RMD withdrawal would depend on personal preferences such as income requirements and other matters.
“Some may choose to take a lump-sum distribution at the beginning of the year so they don’t have to think about it again until the following year. Others might find that taking regular withdrawals is the simplest way to meet their RMD requirements and manage their cash flow, especially if you need the funds to cover living expenses,” the company said.
“Be careful should you plan on waiting to take RMDs until the end of the year. You don’t want to accidentally forget about them during the holidays.”
Such waivers are issued “if the account owner establishes that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall,” the IRS said.
“In order to qualify for this relief, you must file Form 5329 and attach a letter of explanation.”
Beginning January 2024, individuals are allowed to take out up to $1,000 per year to meet emergency expenses before reaching the age threshold.
The amount must be repaid within three years, prior to which no further withdrawals are allowed.