Hi, I’m Bette Hochberger, CPA, CGMA. As we approach the spring of 2025, it’s important for retirees to be aware of an important deadline regarding their retirement accounts. The IRS has issued a reminder that retirees who turned 73 in 2024 must begin receiving payments from their Individual Retirement Arrangements (IRAs), 401(k)s, and similar workplace retirement plans by Tuesday, April 1, 2025. This is a significant date for many, so let’s break down what this means for you.

Understanding Required Minimum Distributions (RMDs)

Required Minimum Distributions, or RMDs, are mandatory withdrawals that retirees must take from their retirement accounts once they reach a certain age. For those who turned 73 in 2024, the first RMD can be delayed until April 1, 2025. This special rule applies to individuals born after December 31, 1950, allowing them a bit more time to plan their withdrawals.

Two RMD Payments in One Year

It’s important to note that the April 1 deadline applies only to the first RMD. For subsequent years, retirees must ensure that their distributions are taken by December 31. This means that if you take your first RMD in 2025, you will also need to take your second RMD for that year by December 31, 2025. Keep in mind that the first distribution is taxable in 2025 and should be reported on your 2025 tax return, along with any regular distributions taken that year.

Which Retirement Plans Are Affected?

RMD rules apply to various types of retirement accounts, including:

  • Traditional IRAs
  • Simplified Employee Pension (SEP) IRAs
  • Savings Incentive Match Plan for Employees (SIMPLE) IRAs
  • 401(k), 403(b), and 457(b) plans

However, it’s worth noting that Roth IRAs are not subject to RMDs while the account owner is alive, providing a bit more flexibility for those who have invested in these accounts.

How to Determine Your RMD Amount

To find out how much you need to withdraw, your IRA trustee is required to inform you of the RMD amount or offer to calculate it for you. Typically, the RMD amount will be reported on Form 5498, which is usually issued early in the year following the tax year in question. For the 2024 distribution due by April 1, 2025, the amount will be shown on the 2023 Form 5498.

Special Considerations for Some Retirees

While most retirees must adhere to the April 1 deadline, some individuals with workplace retirement plans may have the option to delay their RMDs until April 1 after they retire, provided their plan allows it. However, this exception does not apply to 5% business owners or participants in SEP and SIMPLE IRA plans.

If you are a public school employee or work for a tax-exempt organization with pre-1987 403(b) plan accruals, it’s advisable to consult your employer or plan administrator for specific guidance on handling these accruals.

As the deadline approaches, it’s essential for retirees to stay informed and prepared. Make sure to review your retirement accounts, understand your RMD obligations, and consult with a financial advisor if you have any questions. By doing so, you can ensure a smooth transition into this new phase of your financial life.

I’ll see you next time.