Understanding RMDs in 2025: What Retirees and Plan Sponsors Need to Know

Required Minimum Distributions (RMDs) are a critical part of retirement planning, ensuring that tax-deferred retirement savings eventually become taxable income. With the implementation of the SECURE 2.0 Act, several key changes have reshaped how RMDs work in 2025—and beyond.

 

What Are RMDs?

RMDs are the minimum amounts that retirees must withdraw annually from their retirement accounts, such as Traditional IRAs, 401(k)s, 403(b)s, SEP and SIMPLE IRAs. These withdrawals are mandatory once you reach a certain age, and failure to comply can result in penalties.

Key RMD Changes in 2025

1. RMD Starting Age Increased - This change gives retirees more time to grow their savings tax-deferred and plan strategically.¹

• Prior to 2023: RMDs began at age 72.
• 2023–2032: RMD age is 73.
• Starting in 2033: RMD age increases to 75

2. Lower Penalties for Missed RMDs

• The penalty for missing an RMD has dropped from 50% to 25%.
• If corrected within two years, the penalty can be reduced to 10%

3. RMDs Eliminated for Roth 401(k)s

• Starting in 2024, Roth 401(k) accounts are no longer subject to RMDs during the account holder’s lifetime, aligning them with Roth IRAs

4. Expanded Rules for Surviving Spouses⁴

• Surviving spouses can elect to be treated as the deceased account holder for RMD purposes, potentially delaying distributions and using more favorable life expectancy tables

5. Qualified Charitable Distributions (QCDs) ⁴

• QCD limits are now indexed for inflation. In 2025, the annual limit is $108,000.
• A one-time QCD of up to $54,000 can be made to certain charitable trusts or annuities

Start your distributions early. Don’t wait until the deadline. Taking your first RMD in the calendar year you reach the required age can help avoid double withdrawals the following year. Also, consider Roth conversions. Converting traditional accounts to Roth IRAs can reduce future RMD obligations. If you're charitably inclined, use QCDs to satisfy RMDs while reducing taxable income. You can also consider coordinating with other income sources. RMDs can push you into a higher tax bracket, so plan withdrawals carefully.

 

1 https://www.kiplinger.com/retirement/new-rmd-rules1

2 https://accountinginsights.org/what-are-the-rmd-changes-from-the-secure-2-0-act/

3 https://www.kitces.com/blog/rmd-spousal-election-secure-2-0-secure-act-rmd-rules-spousal-beneficiaries-retirement-account/

4 https://irahelp.com/new-reporting-for-2025-qcds/