What's Happening
25 minutes ago

Pope Leo XIV Didn't Spare Trump Administration Criticism On Social Media — Now The President Says He's 'Excited' And Looking Forward To Meeting The ...

benzingabenzinga.com
52 minutes ago

Near a 52-Week High, Is Waste Management an Excellent Dividend Stock to Buy Now?

foolfool.com
52 minutes ago

A Sign Of 'Skyrocketing' Risk Appetite? One-Day Option Trades Explode In Popularity

benzingabenzinga.com
1 hour ago

Bitcoin Closing In On $104,000, Ethereum, Dogecoin Soar On Trade Deal Optimism: Analytics Firm Says Bullish Sentiment A 'Double-Edged Sword'

benzingabenzinga.com
2 hours ago

Warner Bros. Discovery Pulling Back From 'More Is Better' Streaming Strategy, Bets Big On Premium Content — And Letting Scooby-Doo Sniff Out New Fan...

benzingabenzinga.com
2 hours ago

Monster's CEO: 'We Don't Always Win' On Hedging—As Aluminum Tariffs Bite Into Q2 Margins

benzingabenzinga.com
2 hours ago

JD Vance Says Trump Is Right About Jerome Powell: The Fed Chair A 'Nice Guy' But 'Wrong About Almost Everything'

benzingabenzinga.com
3 hours ago

Cathie Wood's $21.5 Million Shopify Grab Defies Post-Earnings Dip, Ark Continues Dumping Palantir, Also Chops Jack Dorsey's Block

benzingabenzinga.com
3 hours ago

Pope Leo XIV-Themed Memecoins Surge After US-Born Robert Francis Prevost Becomes Rome's New Bishop

benzingabenzinga.com
3 hours ago

Why Warren Buffett's Upcoming Move Isn't Cause for Concern

foolfool.com
4 hours ago

Arm CFO Explains Why Company Withheld Fiscal 2026 Full Year Guidance Amid Uncertainty From Customers And Tariff Impacts: 'The Amount Of Signals I'm Ge...

benzingabenzinga.com
4 hours ago

Think The Trade Desk's Best Days Are Behind It? Think again.

foolfool.com
4 hours ago

'Will I Have More Money In The Long Run By Taking Out Student Loans Instead Of Paying Cash?' Suze Orman Weighs In

benzingabenzinga.com
4 hours ago

Scott Bessent Attempted Assassination: Charged Massachusetts Man Originally Planned To Target Mike Johnson And Pete Hegseth

benzingabenzinga.com
4 hours ago

AMD vs. Nvidia: Which Artificial Intelligence Stock Should You Buy on the Dip?

foolfool.com
5 hours ago

Prediction: Owning Berkshire Hathaway Stock Will Not Be the Same After Warren Buffett Steps Down

foolfool.com
5 hours ago

Why Match Group Stock Was Sliding Today

foolfool.com
5 hours ago

$1000 Invested In Caterpillar 20 Years Ago Would Be Worth This Much Today

benzingabenzinga.com
5 hours ago

Elon Musk Said Bill Gates 'Has No Clue' After Gates Claimed Electric Trucks May 'Never Be Practical' Because They Can't Cover Long Distances

benzingabenzinga.com
5 hours ago

Here's How Much $100 Invested In Equinix 15 Years Ago Would Be Worth Today

benzingabenzinga.com

3 Required Minimum Distribution (RMD) Mistakes Retirees Make All Too Often

Saving for retirement in a traditional IRA or 401(k) has its benefits. The fact that your contributions are tax-free could make them easier on you financially during the period when you’re trying to build up retirement wealth.

But there’s a downside to saving in a traditional retirement plan. Not only will your withdrawal be taxed during retirement, but at some point, you’ll be forced to take required minimum distributions, or RMDs. And that could open the door to a world of trouble. Here are some RMD mistakes retirees commonly make — and how to get around them.

A person at a desk holding a tablet.

Image source: Getty Images.

1. Missing the deadline for your first RMD

The rules of RMD deadlines can be confusing when you’re first on the hook to take them. See, normally, RMDs are due by the end of the calendar year. So as long as that money comes out of your IRA or 401(k) plan by December 31, you’re all set.

But your first RMD is due April 1 of the year after you turn 73, assuming you were born before 1960. And because that’s not the typical RMD deadline of December 31, you risk forgetting about it.

But it’s important to know when your RMDs are due to avoid costly penalties. And remember, if you take your RMD between January 1 and April 1 the year after you turn 73, you’ll actually be on the hook for two RMDs that year, with the second one being due December 31. You may want to work with an accountant or financial professional to time your RMDs accordingly when you’re first getting started with them.

2. Forgetting about qualified charitable distributions

The problem with RMDs is that they have the potential to increase your tax burden. But the impact can go beyond that.

Your RMDs count as taxable income. And having to withdraw that money could put you in a position where you face other costs, like taxes on your Social Security benefits or surcharges on your Medicare Part B premiums known as income-related monthly adjustment amounts (IRMAAs).

But there is one thing you can do to avoid that tax hit. If you arrange for a qualified charitable distribution (QCD) from your IRA or 401(k), you can satisfy your RMD and avoid increasing your personal tax liability. The only thing you need to know is that QCDs max out at a certain level each year. In 2024, it’s $105,000.

3. Assuming you need to spend the money

You have to remove funds from your IRA or 401(k) to fulfill your RMD. But that doesn’t obligate you to go out and spend that money.

If you don’t need it all, you can put it into a savings account where it earns interest or use it to set up a CD ladder. Or, you could invest it in a taxable brokerage account.

You have plenty of options, and you shouldn’t assume that you can’t put that money back into some type of account or asset that’s earmarked for savings. It just can’t be a tax-advantaged account like an IRA or 401(k).

RMDs could negatively impact your retirement finances — but they don’t have to. Keep these blunders on your radar so you don’t end up falling victim to them.

The $22,924 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

View the “Social Security secrets” »

The Motley Fool has a disclosure policy.

Related Posts

Social Security probably forms a key part of your retirement plan — and that’s OK. It makes sense you’d factor these benefits into your retirement

A record-breaking 4.18 million Americans are set to turn 65 this year. And even if they’re not planning on retiring anytime soon, those 4.18 million

Several experts have suggested that instead of investing its $2.8 trillion in reserves exclusively in Treasury securities, Social Security could invest some of its money

Based on current economic and market conditions, I’d have to call 2025 a pretty scary time to be retiring. That doesn’t mean people can’t or