Retirees must withdraw by April 1 to avoid penalties

If you turn 73 in 2024, you have an important deadline coming up. You must make your first required minimum distribution (RMD) from your retirement accounts by April 1, 2025. Missing this deadline could lead to a significant tax penalty. Most retirees need to start RMDs from their pre-tax retirement accounts, like traditional IRAs and 401(k) plans. However, Roth accounts are not subject to RMDs until the account holder passes away. The normal deadline for RMDs is December 31 each year, but you have an extra extension for your first one if you wait until April 1 the year after turning 73. If you do not withdraw the correct amount, you could face a 25% penalty on the shortfall. However, if you correct the mistake within two years, the IRS may reduce the penalty to 10%. It's important to act quickly if you miss the deadline. Financial experts often recommend taking your first RMD by December 31 of the year you turn 73. Waiting until April 1 means you'll need to take a second RMD by December 31 of the same year, resulting in two withdrawals, which could increase your taxable income. Your RMD could affect your taxes and Medicare premiums. But in some cases, delaying your first RMD until April 1 could be beneficial, especially if you expect a lower income that year. Always consult a financial advisor to make the best choice for your situation.