If you procrastinate on this, it could cost you $1,000s in penalties you shouldn’t have to pay.

• Based on the RMD calculator at investor.gov, a $1,000,000 qualified account at age 73 requires a $37,735.85 RMD by December 31^st.
• If that money comes out of the account even one day later, on January 1^st, you’ll have to pay a 10% penalty of $3,773.59 — on top of taxes already due.
• The RMD on a $1,000,000 account at age 85 is $62,500 — with a potential penalty of $6,250 for missing it.
• And if you take too long to correct it? Those penalties more than double — from 10% to 25%.

We’re not trying to scare you.

So why highlight these numbers? To help you understand how important it is to be on top of your Required Minimum Distributions. And the potential cost if you aren’t.

The deadline might be December 31^st. But it shouldn’t be the strategy.

Our goal with our clients here at Asset Strategies is to have our client RMDs fully satisfied — or at least scheduled — by mid-October.

If:

• 1) you’ll be age 73 or older at the end of this year, and 2) you have money in tax-deferred retirement accounts…
• Or if you have an inherited IRA or 401(k)…

You absolutely want to make sure you understand and meet your RMD requirements.

And if you have questions? We’re here to help.

Keep reading to learn more about Required Minimum Distributions or RMDs, how they may apply to you, and a fun little rule we use with some clients to add a little excitement to fulfilling this IRS requirement.

What is a Required Minimum Distribution?

RMD stands for Required Minimum Distribution.

For decades, you may have been able to put money into certain retirement accounts without paying income taxes on that money — or on the investment growth inside the account.

Eventually, Uncle Sam gets tired of waiting for you to pay taxes on your retirement savings. And the IRS requires you to begin taking some of that money out as taxable income.

That required annual withdrawal is your RMD.

For traditional IRAs, SEP IRAs and SIMPLE IRAs, RMDs generally begin at age 73 under current law (it will be age 75 for anyone born in the 60s or later).

RMDs also apply to many employer-sponsored retirement plans such as 401(k)s and 403(b)s. Though some people who are still working may be able to delay distributions from their current employer’s plan.

Roth accounts generally do not require RMDs during the original owner’s lifetime. Beneficiaries who inherit Roth accounts, however, can be subject to distribution requirements.

Your RMD amount is calculated using the account balance at the end of the previous year and a life-expectancy factor established by the IRS.

The important part is this:

• Your RMD is NOT simply a suggestion about how much you might want to withdraw. It’s an amount you are generally required to distribute.

What is the deadline for taking your RMDs?

For most people already taking RMDs, the annual deadline is December 31.

There are special rules for your first RMD that can allow it to be delayed until April 1 of the following year. Although doing so can mean taking two RMDs during that following calendar year. With both adding to your annual taxable income.

We would rather not get anywhere close to those deadlines.

Instead, for our clients at Asset Strategies, we aim to have RMDs fully satisfied or at the very least scheduled by mid-October.

Why so early?

Because an RMD isn’t always as simple as requesting a check. There may be decisions to make about which account to use, whether to withhold taxes, whether charitable giving is part of the plan, and what to do with the money once it leaves your retirement account.

And if you have an inherited retirement account, there may be another set of rules to consider.

Getting started early gives you time to make those decisions intentionally. Instead of simply trying to beat a year-end deadline.

By aiming for mid-October, we have time to cover all the details and address unexpected issues before the holidays arrive.

It also gives us time to answer a more useful question than simply, “Did you take your RMD?”

The better question is: “What do you want your RMD to accomplish?”

You Have Options When Taking Your RMDs

An RMD requires money to leave the retirement account. It doesn’t necessarily tell you what should happen next.

You might use your RMD for living expenses.

You might transfer the money to a bank or taxable investment account because you don’t currently need it.

You may want federal or state income taxes withheld from the distribution.

You can also take your RMD in one distribution or through multiple distributions during the year. As long as the required total is distributed by the applicable deadline.

Depending on the account and your situation, securities may sometimes be distributed “in kind.” Meaning shares are transferred out of the retirement account rather than being sold for cash first.

And if charitable giving is already part of your financial plan, there is another option worth discussing.

Giving to Charity? Ask About a QCD.

A Qualified Charitable Distribution, or QCD, allows an eligible IRA owner who is at least age 70½ to send money directly from an IRA to an eligible charitable organization.

When the requirements are met, the QCD can count toward your RMD while the eligible amount is generally excluded from taxable income.

The upside is that the income is never taxed, and every dollar goes straight to the cause you wish to support. If there’s a downside, it’s that you don’t get a double tax benefit — you cannot also claim that excluded QCD amount as a charitable contribution deduction.

For 2026, an individual can make up to $111,000 of QCDs under the annual IRS limit.

That doesn’t mean a QCD is right for everyone. But if you are already planning to give to charity and also need to take an RMD, it may be worth discussing with your financial advisor and tax professional before simply taking the distribution as cash.

Don’t Forget About RMDs on Inherited Accounts

You don’t necessarily have to be in your 70s or older to have an RMD.

If you inherited an IRA or another retirement account, you may be subject to a completely different set of distribution rules.

For many non-spouse beneficiaries who inherited an account after 2019, the SECURE Act requires the inherited account to be emptied by the end of the 10^th year following the original owner’s death.

There are exceptions for certain beneficiaries — including surviving spouses, minor children, disabled or chronically ill individuals, and some beneficiaries who are close in age to the original owner.

The rules can get more complicated from there.

Depending on when the original account owner died and whether they had already reached their required beginning date, annual distributions may also be required during that 10-year period.

In other words, “I have ten years to empty the account” does not necessarily mean “I can ignore it for nine years.”

That’s one reason inherited retirement accounts deserve special attention during your annual review.

How to Make RMDs Fun: Make Them a Birthday Gift!

There’s another simple way to keep RMDs from turning into a December fire drill.

🎁 Turn your RMD payment into a birthday gift to yourself!

We’ve done this with some clients, and they really enjoy it.

Every year as your birthday approaches, you can use it as a reminder to check your RMD status.

Has the amount been calculated? Do you know where the distribution will come from? Do you want taxes withheld? Are you planning charitable gifts? Have you scheduled the distribution?

If your birthday falls near the end of the year, consider using your half-birthday instead.

There’s nothing in the tax code requiring you to do this. It’s simply an easy (and fun) way to turn something you have to remember into an annual habit.

And annual habits are usually much easier to manage than year-end emergencies.

What Happens If You Miss an RMD?

We mentioned this above, but missing an RMD can have tax consequences.

Under current rules, the amount you fail to distribute may be subject to an excise tax or penalty of up to 25%.

That rate may be reduced to 10% if the shortfall is corrected within the applicable correction period. Either the last day of the second tax year after the year the RMD was missed, or when the IRS catches you and assesses the penalty — whichever comes first.

The IRS may also waive the penalty in certain cases involving reasonable error when appropriate steps are taken to correct it.

Either way, you’re better off just getting it right the first time than having to correct a mistake later.

That’s another reason we prefer to deal with RMDs early.

December 31 may be the deadline.

But there’s little benefit to making it the plan.

It’s time to calculate and schedule your RMDs:

If you have an RMD for this year — including an RMD from an inherited retirement account — our goal is to have it completed or scheduled by mid-October.

That gives us time to make sure the requirement is satisfied. And, just as importantly, think through how the distribution fits into the rest of your financial plan.

If you’re unsure whether you need to take an RMD, how much you need to take, or whether strategies such as a Qualified Charitable Distribution might apply to your situation, talk with your financial advisor and tax professional.

The goal isn’t simply to check another box before December 31.

It’s to make your RMD part of the plan.

This article was written for financial advisory clients of Asset Strategies. If you’re not yet a client and you’d like to speak with a financial advisor about RMDs or other strategies for your retirement, request a Welcome Call with an Asset Strategies financial advisor here.