5 Exceptions to the Year End 2025 RMD Deadline
The holidays are here and the countdown to year’s end has started. For many retirement account owners, this means that an important deadline is fast approaching. Most of those who are age 73 or older will need to take a 2025 required minimum distribution (RMD) by December 31, 2025. However, that deadline does not apply to everyone. Even if you are age 73 or over and have a retirement account, you may not be facing the quickly approaching December 31 deadline.
Here are five exceptions that might apply to you:
- You just reached age 73 in 2025. Generally, when you reach age 73, you must take an RMD. However, for the first year you catch a break. You do not have to take your 2025 RMD until your required beginning date (RBD), which is April 1, 2026. You only get lucky once. All future RMDs must be taken by December 31. There is a downside to waiting until 2026 to take your 2025 RMD. You will need to take your RMD for 2025 by April 1 and the 2026 RMD for your second distribution calendar year by December 31. That means two taxable distributions, which would need to be included in income.
- You are “still working.” If you don’t own more than 5% of the company you work for and your plan allows, you can delay your RBD to April 1 of the year following the year you finally retire. This is sometimes called the “still-working” exception to the RBD. It does not apply to an employer plan if you are not currently working for that company. This provision is optional on the part of the plan. You should be aware that the still-working exception does not apply to IRAs, including SEP IRAs and SIMPLE IRAs.
- You have “old money.” If you have a 403(b) and you have funds from participation in the plan from before 1987, there is a rule that allows you to delay RMDs on that money, commonly known as “old money,” until age 75. There must be a cut-off balance clearly showing the December 31, 1986, balance, which most plans will have readily available, or which may even be shown on a current statement. Remember, the regular April 1 RBD applies to all other amounts in the plan, including earnings on the pre-1987 balance.
- You have invested in a QLAC. If you have a qualifying longevity annuity contract (QLAC), the value of the annuity will be excluded from your retirement account balance for RMD calculation purposes. You must begin QLAC distributions by the month after attainment of age 85.
- You have a Roth IRA. You do not need to worry about taking an RMD from your Roth IRA by December 31, because Roth IRA owners are not required to take distributions during their lifetimes.
You will want to be sure that you do not miss your 2025 RMD. There is a 25% penalty on any RMD that is not taken. If you have questions as to whether one of these exceptions applies to you, your best bet is to consult with a tax or financial advisor who is knowledgeable about the complex RMD rules.
By Sarah Brenner, JD
Director of Retirement Education
Ed Slott and Company, LLC
Interested in reading more of our library of articles on topics like this and more? Click here to browse our selection of financial articles.
If you have any more questions about year-end RMD deadlines, click here to schedule a complimentary 20-minute Q&A with a licensed financial advisor who can help you start on the right path.
Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007. Click the title of the group or logo below to learn what that could mean for your retirement plan.