Understanding Required Minimum Distributions (RMDs) in 2025

If you’re approaching retirement or have already withdrawn from retirement accounts, Required Minimum Distributions—or RMDs—should be an important consideration when reviewing and assessing your overall retirement and tax planning process. 

The rules continue to evolve, and as of 2025, there are updated regulations and strategies to consider, which this blog will cover in more detail.  

Consider working with a wealth management firm in Boulder, CO, that can help you incorporate RMDs into a broader financial plan that supports retirement income needs while reducing unnecessary tax burdens. 

Here’s what to know about RMDs this year—and how to approach them thoughtfully.

What Are RMDs and Who Needs to Take Them?

RMDs are mandatory annual withdrawals from most tax-deferred retirement accounts. These include:

• Traditional IRAs
• SEP IRAs and SIMPLE IRAs
• Solo 401(k)s
• Employer-sponsored plans such as 401(k)s and 403(b)s
  

Important Updates:

• Under the SECURE 2.0 Act, the RMD age for individuals born between 1951 and 1959 has increased to 73 as of 2023. 
• Starting in 2033, it will rise to 75 for those born in 1960 or later.
• Roth IRAs do not require RMDs during the account owner’s lifetime. However, Inherited Roth IRAs are subject to RMD withdrawal rules.
• If you are still working and do not own more than 5% of the company sponsoring your retirement plan, you may be able to delay RMDs from that specific plan until retirement.

2025 IRS Life Expectancy Tables and RMD Calculations

RMDs are calculated by dividing your retirement account balance as of December 31 of the previous year by a life expectancy factor provided by the IRS.

The new IRS life expectancy tables allow for slightly lower RMDs due to increased life expectancies, which can help extend the longevity of your retirement savings.

For example, at age 73, the RMD factor using the Uniform Lifetime Table is 26.5, meaning you would withdraw roughly 3.78% of your account balance at age 73. This life expectancy factor varies each year and trends downwards the older you become.

Common Questions About RMDs in 2025

When Do I Need to Take My First RMD?

You must take your first RMD by April 1 of the year after you reach your RMD age (currently 73). However, waiting until April means you’ll also need to take your second RMD by December 31 of that same year, which could increase your taxable income.

What If I Miss an RMD?

Previously, the penalty for missing an RMD was 50% of the shortfall. Under SECURE Act 2.0, that penalty is now reduced to 25% and potentially as low as 10% if corrected promptly. Still, missing an RMD can be costly—another reason why proactive planning is essential.

RMDs from Inherited IRAs: What’s New?

If you inherited a Traditional or Roth IRA after 2019, you’re likely subject to the 10-year rule, meaning the account must be fully withdrawn within 10 years of the original owner’s death. Some beneficiaries (like spouses or individuals with qualifying disabilities) may still qualify for RMDs based on their life expectancy and would not be subject to the 10-year rule.

It’s important to note that if you receive an inherited IRA, RMDs must be taken from the inherited account, and these RMDs cannot be aggregated with other IRAs you own. If you have multiple Traditional IRAs, SIMPLE IRAs, or SEP IRAs, you can calculate each RMD and then take the total from just one account. Employer plans like 401(k)s must take their own RMD separately unless it is rolled into an IRA after the year’s RMD has been satisfied.

When Should I Take My RMD? 

There’s no one-size-fits-all answer, but here are some common approaches that our Boulder financial planners advise. Timing should be based on what best fits your income needs, tax situation, and charitable intentions:  

• Early in the year: This is a great tactic for those who rely on RMDs for living expenses and want to receive the distribution early in the year or want to simplify estate matters.
  
  
• Monthly withdrawals: Deploying this approach can be helpful for budgeting or income smoothing throughout the year.
  
  
• Later in the year: This strategy is useful if you prefer to receive tax-deferred growth throughout the year or want to consider Qualified Charitable Distributions (QCDs) as part of your giving strategy.

Using QCDs to Offset RMD Taxes

One of the most effective ways to reduce taxable income from RMDs is by using Qualified Charitable Distributions (QCDs).

If you’re 70½ or older, you can donate up to $100,000 per year directly from your IRA to a qualified 501(c)(3) charity. These withdrawals do not count as taxable income but also satisfy your RMD for the year.

Be aware that QCDs must be made directly from your IRA to the charity. QCDs cannot currently be made directly to a Donor Advised Fund (DAF). They also are not available to be made from employer-sponsored plans like 401(k)s.

Should I Withhold Taxes from My RMD?

Federal and state income taxes apply to RMDs unless the withdrawal is a QCD. Many retirees withhold taxes directly from the distribution to avoid underpayment penalties or the need for quarterly estimated payments.

But the right withholding amount will vary, depending on your specific circumstances. While Peak Asset Management can offer insights and estimates based on your financial picture, we recommend working with a CPA to fine-tune your tax strategy.

How Peak Asset Management in Boulder, CO, Can Help

RMDs are just one piece of a much larger financial puzzle that is unique to every person and/or couple. At Peak Asset Management, we help clients in Boulder and beyond to align their required withdrawals from retirement accounts with:

• Long-term tax planning strategies
• Charitable giving objectives
• Estate and legacy planning
• Investment and income coordination and allocation
  

Our fiduciary approach to our relationship with you means your best interest always comes first. Whether you are taking your first RMD or reevaluating your distribution strategy, we’re here to help you stay compliant, efficient, and informed.

If you’re unsure about your 2025 RMD plan or how taking RMDs will affect your long-term financial plan, contact Peak Asset Management in Boulder, CO, to schedule a consultation.

DISCLAIMER

Advisory Services offered through Peak Asset Management, LLC, an SEC registered investment advisor. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This content is developed from sources believed to be providing accurate information and may have been developed and produced by a third party to provide information on a topic that may be of interest. This third party is not affiliated with Peak Asset Management.  It is not our intention to state or imply in any manner that past results are an indication of future performance. Copyright © 2025 Peak Asset Management