The IRS mandates that adults 73 and older take required minimum distributions (RMDs) — mandatory annual withdrawals — from their retirement accounts by Dec. 31 or else face a costly 25% penalty on the RMD not taken. If you turned 73 this year, you technically have until April 1, 2025 to take your 2024 RMD. But for everyone else, there are only a few weeks left.
You may not want to take an RMD because it increases your taxable income and may force you to sell some of your investments when you don’t want to. The good news is, you might not have to take a 2024 RMD from some of your accounts if any of the following four situations apply to you.
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1. You’ve already taken your RMDs for the year
This one is pretty simple but it bears repeating: If you’ve already withdrawn an amount equal to or greater than your RMD for the year, you don’t have to withdraw any more right now. If you’re not sure whether you’ve taken enough out, follow the steps on the IRS RMD worksheet to calculate yours.
Keep in mind that each account type has its own rules when it comes to RMDs. IRAs permit you to withdraw all of your RMDs from a single account if you like. For example, if your RMD for one account is $8,000 and your RMD for another is $2,000, you could withdraw all $10,000 from one, $5,000 from each, or any combination you like as long as you take out at least $10,000 total from your IRAs in 2024.
401(k)s, on the other hand, require you to take RMDs from each account individually. However, you may be able to skip RMDs from certain 401(k)s that fit the rules below.
2. You’re still working (and own less than 5% of your company)
The IRS permits you to skip RMDs from your current workplace retirement plan if you’re still working and own less than 5% of the company. In this case, RMDs for this account begin in the year after you retire. So if you retire in 2025, you wouldn’t have to take an RMD from this account until 2026.
Note that this only applies to your current workplace retirement account. You still have to take RMDs from any IRAs as well as any workplace plans connected to former employers. However, you may be able to get around the latter by rolling your old 401(k)s over into your current one if your plan permits this.
3. You have Roth retirement accounts
Roth IRAs have long been exempt from RMD requirements and as of 2024, Roth 401(k)s are as well. That’s because you’ve already funded these accounts with after-tax dollars, so any withdrawals are typically tax-free. The IRS has no incentive to force you to take money out of these accounts when it won’t get a cut.
4. You’ve made a large enough qualified charitable distribution (QCD)
The IRS gives adults 73 and older a way around RMDs if they want to avoid the increased tax bill. To do this, you must directly transfer funds from your retirement account to a qualifying charitable organization. It’s important that the money goes directly to the charity without passing through your hands. Otherwise, it won’t be a QCD.
You can make a QCD of up to $105,000 in 2024, and you may do this even if you’re claiming the standard deduction this year. Make sure you get a receipt to prove your donation, though. You’ll need this in your records in case the IRS audits you.
QCDs count as withdrawals for purposes of meeting the RMD amount, and so they can help you avoid the 25% penalty for not taking your RMD. Unlike most distributions from traditional IRAs, a QCD also doesn’t count as adjusted gross income (AGI). This is important, because higher AGIs can make you ineligible for certain tax credits and deductions. They can also put you at risk of owing Social Security benefit taxes.
As long as you qualify for one of the above exceptions, you don’t have to worry about squeezing in an RMD before the end of the year. But if you haven’t taken yours yet, act fast. It can take some time to get your money out of your account, so you don’t want to wait until the last minute.
