What Everybody Needs to Know About Required Minimum Distributions (RMDs) in 2025
Not knowing the details on your RMDs could end up costing you.
The government offers retirement savers a pretty good deal if they use certain retirement accounts like a 401(k) or IRA. Traditional accounts let many people get deductions on contributions upfront, letting you wait to pay taxes when you take distributions. That can give you more money to invest today.
But the government won't let you delay your tax bill indefinitely. Eventually, you'll have to start taking money out of your retirement accounts. Once you reach a certain age, the government imposes required minimum distributions, or RMDs, on your accounts each year. You'll have to pay income taxes on the amount you withdraw. Those with inherited IRAs usually have to take RMDs as well.
If you don't know all the rules for required minimum distributions, you could face some stiff penalties. Failing to take the full required minimum distribution on time could result in a penalty of up to 25% of the amount you were supposed to withdraw. On top of that, you'll still be required to take the distribution and pay taxes.
