New RMD Rules in 2025: What Retirees Need to Know to Avoid Penalties

A mature couple sitting at a kitchen table, looking at retirement documents and a laptop together, with papers labeled 'RMD 2025' and 'Tax Penalties' — natural daylight, casual yet concerned expressions

What Retirees Need to Know to Avoid Penalties

In 2025, major updates to the IRS’s Required Minimum Distribution (RMD) rules go into effect. These changes will impact retirees across the country. Whether you’re nearing retirement or already taking distributions, it’s critical to understand how these new rules work—especially if you want to avoid costly penalties and preserve your retirement savings.

This guide breaks down what’s new, who it affects, and how to plan strategically.

What Are Required Minimum Distributions (RMDs)?

RMDs are mandatory withdrawals the IRS requires from certain retirement accounts once you reach a specific age. These withdrawals ensure that tax-deferred savings eventually become taxable.

RMDs apply to:

  • Traditional IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • 401(k)s
  • 403(b)s
  • Other employer-sponsored retirement plans

They do NOT apply to:

  • Roth IRAs (during the account holder’s lifetime)
  • Roth 401(k)s (starting in 2024, per SECURE 2.0 Act)

The amount you must withdraw is based on your age, your account balance as of December 31 of the prior year, and life expectancy factors published by the IRS.

What’s Changing in 2025?

The changes to RMD rules under the SECURE 2.0 Act were introduced in response to increased life expectancies and the evolving needs of today’s retirees. With people living longer, the government has provided more time for retirement savings to grow before distributions are required.

  1. RMD Starting Age Moves to 73 (and Eventually 75)

As part of the SECURE 2.0 Act, the age at which retirees must begin taking RMDs is increasing:

  • If you turn 73 in 2025 (born in 1952), your first RMD must be taken by April 1, 2026.
  • If you’re born in 1960 or later, your RMDs begin at age 75.

This gives retirees more time to let their retirement accounts grow tax-deferred, but it also creates more planning opportunities—and risks if you delay too long.

  1. No More RMDs from Roth 401(k)s

Starting in 2024, Roth 401(k) accounts are no longer subject to RMDs. This aligns them with Roth IRAs and increases flexibility for retirees who want to control when and how they withdraw funds.

  1. Reduced Penalties for Missed RMDs

Previously, failing to take your RMD on time triggered a hefty 50% penalty on the amount you didn’t withdraw. As of 2023, this penalty has been lowered to:

  • 25% by default
  • 10% if corrected within two years

This still carries financial consequences, but it provides a more reasonable correction window.

RMD Starting Age by Birth Year: Quick Reference Table

Birth Year RMD Starting Age
Before 1951 72 (prior rules)
1951–1959 73
1960 or later 75

This table provides an at-a-glance summary of when RMDs begin based on your birth year, per SECURE 2.0 Act regulations.

RMD Age Requirements: Expanded Table

Birth Year Range RMD Starting Age Effective Year Notes
Before 1951 70½ Pre-2020 Original RMD age prior to SECURE Act
1951 – 1959 73 2023–2032 Applies to those turning 73 in 2023–2032
1960 or later 75 2033 onward New RMD age for those born 1960 and after

This expanded chart helps retirees quickly determine when RMDs begin based on their date of birth and legislation timelines.

How Are RMDs Calculated?

RMDs are calculated using IRS life expectancy tables, most commonly the Uniform Lifetime Table. The formula is:

Account balance on Dec. 31 of the previous year / Life expectancy factor = RMD amount

For example, a 73-year-old with a $500,000 IRA might use a factor of 26.5. Their RMD would be roughly:

$500,000 ÷ 26.5 = $18,868

The RMD percentage increases with age, meaning your withdrawals get larger each year. This can create higher taxable income over time, especially if left unplanned.

Special Rules for Married Couples

If your spouse is more than 10 years younger and the sole beneficiary of your retirement account, you can use the Joint Life and Last Survivor Expectancy Table. This results in a smaller RMD compared to the Uniform Lifetime Table.

Benefits include:

  • Lower required withdrawal amounts
  • Extended tax-deferred growth
  • More control over household tax planning

For couples with similar ages, it’s often strategic to stagger withdrawals or consider Roth conversions to balance taxable income over time.

Inherited IRAs: Know the 10-Year Rule

If you inherit an IRA (as a non-spouse), you’re likely subject to the 10-Year Rule:

  • You must fully withdraw the funds within 10 years of the original owner’s death.
  • Some beneficiaries (like disabled individuals or minor children) qualify for exceptions.
  • If the original owner already began RMDs, annual RMDs may be required during the 10-year window.

This rule can significantly impact tax planning for heirs. Distributing the funds evenly over 10 years may reduce your tax liability.

Strategies to Minimize RMD Impact

Proactive planning can reduce the tax hit from RMDs and help you preserve more of your retirement savings. Here are three powerful strategies:

  1. Qualified Charitable Distributions (QCDs)

If you’re age 70½ or older, you can donate up to $100,000 per year directly from your IRA to a qualified charity. This counts toward your RMD and reduces your taxable income.

  • Must go directly to a qualified 501(c)(3) charity
  • Cannot also be claimed as a charitable deduction
  • Excellent for philanthropically minded retirees
  1. Roth Conversions

Converting traditional IRA assets to a Roth IRA before RMD age can reduce future RMDs entirely. You’ll pay taxes on the conversion amount now, but you avoid RMDs and future taxes on growth.

  • Consider converting in lower-income years or before Social Security begins
  • Partial conversions help manage tax brackets
  • Roth IRAs are not subject to RMDs
  1. Smart Timing of First RMD

You have the option to delay your first RMD until April 1 of the year after you reach RMD age, but you must take a second RMD by December 31 of that same year.

  • Taking two RMDs in one year could push you into a higher tax bracket
  • Consider spacing RMDs to manage income more evenly

Advanced Strategies and Considerations for 2025

Impact on Different Age Groups

Retirees turning 73 in 2025 must take their first RMD by April 1, 2026. For this group, it’s crucial to evaluate whether taking their first distribution in 2025 or delaying until 2026 (and taking two RMDs in that year) results in lower overall tax liability.

Younger retirees born in 1960 or later now have until age 75 to begin RMDs. This longer window provides opportunities to convert assets to Roth accounts, optimize Social Security timing, or implement charitable giving strategies.

RMDs and Social Security

RMDs count as ordinary income and can increase your taxable Social Security benefits. If RMDs push your income above certain thresholds, up to 85% of your Social Security benefits may become taxable. Coordinating RMD timing with Social Security claiming strategies is essential to manage total taxable income.

New Jersey and State-Level Tax Considerations

In New Jersey, pension and retirement income may be excluded from state taxation for qualifying filers. As of 2024, married couples filing jointly with $100,000 or less in income can exclude up to $100,000 in qualifying retirement income. This includes IRA withdrawals and pensions. Planning RMDs around this threshold can reduce your NJ tax bill.

Using Annuities for RMD Planning

Certain annuities, such as Qualified Longevity Annuity Contracts (QLACs), can be used to defer RMDs past the usual start age. Up to $200,000 of retirement assets (or 25% of an IRA) may be used to purchase a QLAC, and those assets are exempt from RMDs until age 85. These strategies are complex and should only be considered with guidance from a financial or tax professional.

Search-Optimized Questions Integrated

  • Do I have to take RMDs from my Roth 401(k) in 2025?
  • What happens if I miss the RMD deadline in 2025?
  • How does the RMD age increase affect my retirement plan?
  • Best ways to reduce RMD taxes in retirement 2025

Common Mistakes to Avoid with RMDs

Close-up of a calendar marked with 'RMD Deadline 2025' and sticky notes that read 'Avoid Penalties

Even experienced investors make RMD errors. Here are a few to avoid:

  1. Missing the Deadline
  • Most RMDs must be taken by December 31 each year
  • The first RMD can be delayed until April 1, but requires careful timing
  1. Taking the Wrong Amount
  • Miscalculating your RMD, especially with multiple accounts, can trigger penalties
  • Each 401(k) must have its own RMD calculated and taken separately
  1. Forgetting to Adjust for Beneficiaries
  • Inherited IRA rules are complex—especially under the 10-Year Rule
  • Consult a tax advisor to determine annual withdrawal obligations
  1. Overlooking Roth 401(k) Changes
  • As of 2024, Roth 401(k)s are no longer subject to RMDs
  • Make sure your plan administrator has properly updated your account settings

Helpful Tools and Resources

IRS RMD FAQs: https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

FINRA RMD Calculator: https://rmdcalculator.nga.finra.org/

RMD Life Expectancy Tables: https://www.irs.gov/pub/irs-pdf/p590b.pdf

WFP Tax Partners – Tax Planning Services: https://wfp-taxes.com/services/tax-preparation-planning/

How WFP Tax Partners Helps You Navigate RMD Rules

Understanding the new RMD rules for 2025 is the first step. But execution—taking the right amount at the right time and coordinating it with your broader tax and retirement strategy—is where real value lies.

At WFP Tax Partners, we specialize in helping high-net-worth individuals, retirees, and professionals from Fortune 500 companies develop tax-smart withdrawal strategies. Our proactive approach to retirement tax planning includes:

  • Custom RMD tracking and calculations
  • Roth conversion strategies
  • Charitable giving optimization (QCDs)
  • Coordination with estate and legacy goals

Our certified tax professionals are based in Liberty Corner, Basking Ridge, New Jersey—a historic hub for financial services—and proudly serve clients across the nation.

Retire Smarter: Start Your RMD Strategy Today

With penalties reduced—but not eliminated—and new age thresholds now in play, 2025 is the year to re-evaluate your retirement withdrawal plan.

Don’t wait until the deadline. Let’s build your personalized RMD strategy now.

Contact WFP Tax Partners today to schedule your confidential consultation and gain clarity, confidence, and control over your retirement distributions.

Frequently Asked Questions (FAQs)

  1. What is the new RMD age in 2025?
    The RMD age in 2025 is 73 for individuals born between 1951 and 1959. For those born in 1960 or later, RMDs begin at age 75 starting in 2033.
  2. Are Roth 401(k)s subject to RMDs?
    As of 2024, Roth 401(k)s are no longer subject to required minimum distributions, aligning with Roth IRAs.
  3. What happens if I miss my RMD?
    If you fail to take your RMD on time, the penalty is 25% of the missed amount—or reduced to 10% if corrected within two years.
  4. How is my RMD calculated?
    Your RMD is calculated using your account balance as of December 31 of the prior year, divided by a life expectancy factor from IRS tables.
  5. Can I take my first RMD after my birthday?
    Yes. You may delay your first RMD until April 1 of the year after you reach the required age, but you’ll need to take two distributions that year.