Time is running out for millions of American retirees facing one of the year's most important—and most punitive—financial deadlines. If you're age 73 or older and haven't yet taken your required minimum distribution (RMD) from traditional IRAs, 401(k)s, and similar retirement accounts, December 31, 2025, is your absolute last chance.
Miss the deadline, and the IRS will impose a penalty of 25% on the amount you failed to withdraw. That's a steep price for procrastination.
Who Must Take an RMD by December 31?
The RMD rules apply to anyone who has reached age 73 and holds assets in tax-deferred retirement accounts, including:
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k) plans
- 403(b) plans
- 457(b) plans
- Other defined contribution plans
Important exception: Roth IRAs do not require distributions during the owner's lifetime. If all your retirement savings are in Roth accounts, you can skip this deadline entirely.
The First-Year Exception—With a Catch
If you turned 73 in 2025, you have a choice: take your first RMD by December 31, 2025, or delay it until April 1, 2026. However, the deferral comes with a significant downside.
Waiting until April means you'll need to take two RMDs in 2026—your first-year distribution plus your regular 2026 amount. That bunching of income could push you into a higher tax bracket, trigger Medicare premium surcharges (IRMAA), and affect other means-tested benefits.
For most people, taking the RMD in 2025 is the smarter choice, spreading the tax impact across two years rather than concentrating it in one.
How to Calculate Your RMD
Your required minimum distribution is based on two factors:
- Your account balance: The value of your retirement account(s) as of December 31, 2024
- Your life expectancy factor: A number from IRS tables based on your age and, in some cases, your beneficiary's age
Divide your account balance by your life expectancy factor to determine the minimum amount you must withdraw. For example, a 75-year-old with a $500,000 IRA balance would use a life expectancy factor of 24.6, resulting in an RMD of approximately $20,325.
Most brokerage firms and financial institutions calculate RMDs automatically and can even process the distributions for you—but the responsibility to ensure compliance ultimately falls on you.
What Happens If You Miss the Deadline?
The penalty for failing to take your RMD is severe: 25% of the amount you should have withdrawn. If your required distribution was $20,000 and you missed it entirely, you'd owe $5,000 in penalties alone, on top of the regular income taxes eventually due.
There is modest relief available: if you correct the error within two years by taking the required distribution and filing an amended return, the penalty drops to 10%. But preventing the problem is far better than trying to fix it after the fact.
The Still-Working Exception
One lesser-known rule benefits people who are still employed past age 73: if you're actively working and participate in your current employer's retirement plan, you may be able to delay RMDs from that plan until the year you actually retire.
Key requirements:
- You must still be employed (not retired)
- You must not own more than 5% of the business sponsoring the plan
- This exception only applies to workplace plans, not IRAs
This can be a valuable planning opportunity for those who continue working in their 70s, allowing additional years of tax-deferred growth.
Action Steps for the Final Days of 2025
If you haven't taken your 2025 RMD yet, here's what to do immediately:
1. Check Your Account Statements
Verify whether any automatic RMD distributions have already been processed. Many custodians set up automatic withdrawals that may have already satisfied your requirement.
2. Contact Your Financial Institution
If you need to request a distribution, call or log in immediately. Be aware that processing times vary, and with December 31 falling mid-week, some institutions may have limited capacity for last-minute requests.
3. Consider Qualified Charitable Distributions
If you're charitably inclined, you can direct up to $105,000 of your RMD directly to qualified charities through a Qualified Charitable Distribution (QCD). This satisfies your RMD requirement while keeping the distribution out of your taxable income—a powerful tax-planning tool.
4. Document Everything
Keep records of your RMD calculations and the distributions you've taken. If questions arise later, you'll want clear documentation of your compliance.
The December 31 deadline waits for no one. If you're subject to RMD rules and haven't acted yet, the time to address this is measured in hours, not days.
